Due Diligence Reporting
Due Diligence
Before purchasing a restaurant, cafe, club, bar or land that is to be developed into a hospitality project it is imperative to undertake a exhaustive investigation of the business to ensure no dangerous surprises spring up after you buy or build your business.
What is Due Diligence?
A report or undertaking that information / representations are true, correct, not misleading or ambiguous.
An explicit reality of facts presented to a prospective buyer.
A due diligence report minimises chance for errors or mistakes to be found after purchasing land or a business. Due diligence give some "insight" into problems that may arise at various stages after purchase. By completing due diligence reports, we are able to present possible downfalls in a business or its structure.
Due diligence reporting is not about auditing just financial information, but doing that exhaustive research into all aspects of the business. From the concept behind the business to the management team driving the business.
A very example:
A client requests due diligence reporting to buy a restaurant business that has the following characteristics:
Staffing: 1 director, 4 employees
Location: Main street Central CBD
Competition: 4 other
Sellable items: Lunch takeaways
Prior to making and decisions or making any offer s to buy you may do the following:
- Check directors' qualifications, experience (usually found in the executive summary of the seller's business plan
- Assess quality of staff training and documentation
- Visit location
- Assess competitors
- Check average spend against historical financial data
- Scrutinise financial data
- Compare menus with competition
- Compare pricing schedules
- And many more "metric" assessments
There are many other factors to consider when purchasing. In the example above, there are no comments made about design, plans, building costs, repairs and maintenance issues and serviceability as we have made the assumption that the business premises are not freehold.
Each report is individual and unique to each client just as each assessment will reveal individual results. Getting advice from your accountant is not enough. You accountant may be able to suggest ways of cost reduction and assist in preparation of financial data, however it is always wise to seek as much advice prior to any purchase.
One way or another, these measures that you take, can save you thousands of dollars. Due diligence reports are highly recommended.
Contact our Due Diligence expert for more information.
