Investigating Entrepreneurial Opportunities : A Practical Guide for Due Diligence

by Richard P. Green, II

• ISBN13: 9780803959415
• ISBN10: 0803959419
• Format: Hardcover
• Copyright: 2000-02-15
• Publisher: Sage Publications, Inc

Summary

'The student of entrepreneurship will find this book a valuable resource as it will go a long way to redressing any gaps in their understanding of due diligence... A business studies course based outside the USA could easily develop assignments or run tutorials based on this book requiring students to investigate the financial, taxation etc differences for purchasers of businesses in their own country' - TechnovationIn this book, the authors, who have both bought and sold several businesses, reveal creative and low cost ways to do your own diligence in investigating entrepreneurial opportunities. The book covers all the basics, including market, products, insurance, facilities, assets, short and long-term liabilities and much more.

Table of Contents

Introduction	ix
An Overview of Investigation	1	(15)
The Position of Due Diligence in the Process of Acquiring a Business	1	(1)
The Process of Due Diligence in Business Acquisitions	2	(1)
The Risks of the Entrepreneurial Endeavor	3	(1)
Informed Decisions	4	(1)
Business Plan Format	5	(2)
Targets of the Due Diligence Process	7	(2)
A Process of Investigation	9	(6)
A Sense of Investigation	15	(1)
Defining the Enterprise	16	(16)
Strategic View	17	(2)
Acquisition Questions	19	(13)
Defining the Product	32	(7)
The Strategic Definition of a Product	33	(1)
Operational Definition of Product	34	(2)
Sources of Information for Product Definition	36	(3)
Investigating the Market for the Product	39	(12)
Analyzing Sales History	39	(3)
Returns, Allowances, Nonreported Sales, and Barter Transactions	42	(3)
Determinants of Demand for the Product	45	(1)
Description of the Consumer	46	(1)
Channels of Distribution	47	(1)
The Selling Strategy	48	(1)
Market Research	49	(2)
Investigating Product Costs of Manufactured Goods	51	(13)
Costed Bill of Material	52	(1)
Volume Effects on Costs	53	(1)
Labor Requirements	54	(1)
Production Overhead	54	(1)
Fixed and Variable Costs	55	(3)
Staffing Requirements	58	(1)
Production Equipment	59	(1)
Production Layout Analysis	60	(1)
Scrap and By-Products	61	(1)
Volume Analysis	61	(3)
Investigating Purchased Items	64	(12)
Discounts and Purchase Quantities	64	(4)
Delivery and Terms of Purchase	68	(1)
Characteristics of the Supplier	69	(7)
Facility Concerns	76	(11)
Size and Capacity Concerns	77	(3)
Signage and Frontage Concerns	80	(3)
Lease Terms	83	(2)
Competing and Complementary Businesses	85	(2)
Insurance for the Business	87	(5)
Product Liability Insurance	87	(2)
Employee Health Care	89	(1)
Workers' Compensation	90	(1)
Property and Casualty Insurance	90	(2)
Valuation of Short-Term Assets	92	(8)
Cash	93	(1)
Inventory	94	(2)
Accounts Receivable	96	(4)
Valuation of Long-Term Assets	100	(8)
Long-Term Leases	101	(1)
Equipment	102	(3)
Land and Buildings	105	(3)
Intangible Assets	108	(8)
Goodwill	110	(2)
Intangible Assets Derived From Technology	112	(1)
Intangible Assets Derived From Business Processes	113	(2)
Conclusions	115	(1)
Short-Term Liabilities	116	(12)
The Nature of Short-Term Liabilities	117	(1)
Determining the Existence of Short-Term Liabilities	117	(2)
Commonly Manipulated Short-Term Liabilities	119	(5)
Short-Term Borrowings and Bank Relations	124	(1)
Shareholder and Family Member Loans	125	(1)
Conclusions	126	(2)
Long-Term Liabilities	128	(10)
The Nature of Long-Term Liabilities	129	(5)
Common Long-Term Liabilities	134	(3)
Conclusions	137	(1)
Contingent Liabilities and Pending Litigation	138	(5)
Finding Contingent Liabilities	139	(1)
Pending Litigation	140	(1)
Evaluating The Liability	141	(2)
Owner Discretionary Spending	143	(9)
Officer Salaries	143	(1)
Over-Market or Under-Market Employee Wages and Salaries	144	(1)
Family Salaries	145	(1)
Perks for Family Members	146	(3)
Philanthropic Giving	149	(1)
Conclusions	150	(2)
Placing a Value on the Business	152	(7)
Valuation Methodologies	153	(5)
Conclusions	158	(1)
IRS Publications	159	(1)
Sources of Demographic Information	160	(1)
Tasks to Be Completed for Due Diligence	161	(2)
Questions to Be Answered During the Exercise of Due Diligence	163	(6)
References	169	(4)
Index	173	(8)
About the Authors	181