Having done your research, it is important to verify the information you have. A period of time is allowed for you to access the business' books and records to verify that all of the information that you have been told up to now is accurate. This is known as due diligence. It should give you a realistic picture of how the business is performing now and how it is likely to perform in the future.

When to begin due diligence

Don't start due diligence until you've agreed a price and terms with the vendor. For a down payment they may agree to take the business off the market during your investigation.

The investigation period is negotiable - but most small businesses need at least three to four weeks.

Where to get help

Ideally you should get accountants and solicitors to help you identify risk areas but you can also get detailed information about companies direct from the NI Companies Registry website. However this is only in the case of Limited companies. All other accounts are private to the companies.

Due diligence is about much more than the finances of a business. You need to come out of this period knowing exactly what you are getting into, what needs to be fixed, what it will cost to fix them and if you are the right person to take on this business.

Key areas to cover are:

• Employment terms and conditions.

• Outstanding litigation.
  
  
• Major contracts and orders.
  
  
• IT systems and other technology
  
  
• Environmental Issues
  
  
• Commercial management including customer service, research and development, and marketing
  
  

Information sources

Dig as deeply as you can and use whatever documents are available. For instance, if you're looking at employee records, you could check out:

• Payroll records.

• Staff Files
  
  
• copies of pension and profit sharing plans plus financial statements, if relevant
  
  
• employment contracts
  
  
• the staff manual
  
  
• union contracts, if relevant
  
  

You may also need information from external sources such as the landlord, tax office or bank.
More Info on Due Diligence.