Due Diligence When Buying a Business: What to Look For

Amazing FBA Amazon and ECommerce Podcast, for Amazon Private Label Sellers, Shopify, Magento or Woocommerce business owners, and other e-commerce sellers and digital entrepreneurs.

In a previous podcast, we outlined the initial steps of finding potential businesses to acquire: deciding on your ideal business, defining your buying criteria, researching revenue potential, and exploring acquisition channels. Now, it’s time to dive deeper into the crucial phase of due diligence. Filtering through potential acquisitions is essential to avoid wasting time and resources. This stage requires a swift yet meticulous approach. Remember, you're forming initial impressions and hypotheses. Detailed analysis comes later. For now, focus on identifying promising candidates that align with your goals. Time Stamp[00:58] - Overview Of Business Buying Process[01:19] - Importance Of Previous Steps[02:01] - Defining Financial Criteria[02:39] - Finding Deals And Deal Flow[03:25] - Need For Quick And Simple Filtering[04:41] - Deciding On Meeting Sellers[05:22] - Filtering Ratios And Mindset[06:15] - Main Areas For Filtering Businesses[07:04] - Revenue Considerations[08:24] - Investment Capacity Alignment[10:25] - Category And Industry Alignment[11:15] - Recurring Revenue Importance[12:14] - Market Fragmentation Analysis[13:39] - Additional Fit Factors[15:10] - Simplifying The Filtering Process[16:22] - Offer For Additional Assistance[17:51] - Value Of Deal Making Skills[18:10] - 10k Collective Uber Mastermind Introduction[19:39] - Three-Year Plan For Seven-Figure Exit Does the Business Fit Your Buying Criteria? The first step in due diligence is assessing whether a business aligns with your predefined criteria. Here are key factors to consider: Revenue A business's revenue is a fundamental indicator of its value. Establish a minimum revenue threshold based on your investment capacity. Ensure the business's income stream aligns with your financial goals and risk tolerance. Category Evaluate if the business operates within an industry you possess expertise in or have a keen interest in. Consider the market's overall health, growth potential, and competitive landscape. Recurring Revenue Prioritize businesses with predictable and consistent income streams. Recurring revenue provides a stable foundation and reduces reliance on one-time sales. Market Fragmentation Analyze the competitive landscape. A fragmented market often presents opportunities for market leadership and consolidation. Assess the potential for growth and expansion within the niche. Additional Fit Factors Consider the business's geographic location and alignment with your target market. Equally important is evaluating the business culture and the seller's personality. A good cultural fit can streamline integration and decision-making.