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The all-important process of due diligence is an essential step in a long journey whenever you buy a business. Some people might think that this is just a part of a process that can be siphoned off to their accountant, even though they realize that it might be very important. They may feel that they can trust the accountant to inform them of anything untoward and deal with these matters at that time.

As the buyer, it is your responsibility and nobody else’s to compile a due diligence checklist, which will help you to oversee the entire process from beginning to end. Delegation should be furthest from your mind. Of course it is acceptable to engage the services of professionals and advisors, but you will reference your due diligence checklist from the moment you start to think about the business purchase, right up to the moment that you get ready to sign the papers — if you do!

You cannot afford to make any mistakes during any part of the process. Remember, that as time marches on, there is more pressure, more input from third parties and more of a temptation to shortcut the process. You must never do this and make sure that you stick to your due diligence checklist firmly. A lot of the checklist items are inherently based on a common sense approach, thankfully. Indeed, you could do a lot of work before you even tell anybody what you’re thinking about doing. For example, you can check out the area that you are considering, what kind of people live there, traffic flows, the potential business prospects and a whole host of information that is, after all, essential.

If you delegate the process of due diligence to your accountant or advisors alone, with only cursory input from yourself, you are almost certain to overlook something in the long run. Remember how dynamic a business can be and how so many external influences and factors come into play in order to make it work, let alone succeed. It is your job to understand every single one of these external influences and you cannot rely on the owner alone to alert you. This is why you should be so diligent with your due diligence checklist, following through and exploring every avenue, thoughtfully.

The owner will be very focused on the business and will often not be able to look at it from a broader perspective. This is why you have to stand back at the very beginning and try and see some of these issues or problems, that the owner may well not be able to see, himself. You need to gather so much information during your process of due diligence that you actually know more about the business than the outgoing seller and if you get to this position you will be far more educated and confident as that purchase contract is put in front of you. Remember that a due diligence checklist should be a formal document and not something that is “in your head.” Approach this process methodically and remember that, to be most effective, the process is likely to take at least a month or more to complete.

Richard Parker is the author of the How to Buy a Good Business at a Great Price series. As President and founder of Diomo Corporation – The Business Buyer Resource Center, his materials, seminars and consulting have helped thousands of business buyers realize their dream to buy a business.

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Tags: business, business for sale, buy a business, buy business, due diligence checklist