Secrets of Due Diligence for Small Business
Secret #73: Equipment Vendors Are Your Friends
For most small businesses trying to acquire another company, truly complete due diligence is too expensive. There are a number of ideas I have suggested to clients over the years to help keep their costs down. One of these is bringing in and talking with the vendors of the existing equipment owned or leased by the selling company.
Here's how this works. Obviously you will first need to get the cooperation of the selling company to do this. Then, both you and the seller tell the vendors of the possible sale, and ask them to come in and look at each piece of equipment. Ideally, ask the seller to allow you to be alone with each vendor. Whether that is possible or not, after the visit, arrange to have lunch or coffee with each vendor independently. Also, go to their offices, see everything, meet everybody, pick up every piece of literature. Tell them you want to learn everything, and let them educate you.
It is very important to show these vendors that you want to develop long-term relationships with them. Most of the time, these vendors are an incredible font of knowledge, not just about the equipment directly, but also about how the equipment used in operations, and the industry in general. And you can usually learn their opinion of the company you are thinking of buying. At the very least, you should be able to learn such things as:
- Is there equipment that absolutely has to be replaced?
- Does some equipment have safety issues critical to the workforce?
- In the normal life of the existing equipment, when should each piece be replaced, modified, or upgraded?
- Has the seller grossly misrepresented something about the equipment?
- What is the true market value of the equipment?
This is an excerpt from my upcoming book, ‘The New Diligence: Building Better Business for Small Businesses.’
Charles F. Bacon, CEO & Keeper of the Vision
charlesbacon
Due Diligence, Inc.
www. superdiligence (dot)
It's about mutual respect. However you treat one person will always bounce back to you someday. Doing research like this can be very beneficial is one is patient enough. Who better to give you the tricks of the trade or the inside dish than the equipment vendors themselves?
Posted by: Jen, writer MembershipMillionaire.com | January 9, 2008 2:02 PM | Permalink to Comment