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Home > Tools and Resources > Ask the Expert > How Much Should First-Time Buyer Expect to Pay for Financial Due Diligence?

How Much Should First-Time Buyer Expect to Pay for Financial Due Diligence?

By Richard Parker | Diomo Corporation
Contact Richard Parker | Visit Website | About The Author

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Question:

I am seeking to be a 'first time' buyer of a business. I understand that I need due diligence, and that I need expert help, but what should I expect to pay for this service? How do they arrive at a fair figure to charge?

Answer:

For the financial due diligence of a business you will need to engage an accountant to complete the review. Before we discuss approximate costs, there are several important factors to consider which will have a direct impact on the final costs incurred for their services:

On the first day of the due diligence period, review all of the documents that the seller has provided. Chances are if it doesn't make sense to you, it won't to your accountant. Plus, if a lot of material is missing, you won't be paying the CPA to sit around and do nothing.

Insofar as costs are concerned, I have found that most small businesses being sold for under $500,000 will cost around $2,500 - $5,000 to complete a detailed financial review. Conversely, I have paid as little as $1,500 to have a very competent accountant do the work, but, I made certain that it was flawlessly organized for them beforehand. Most accountants, unlike attorneys, will provide you with a very accurate quote of what they feel the final bill will be. The difference between the two professions is that the financial review steps are fairly standard and so they can closely predict the time that may be involved.

Get more expert advice in Richard Parker's How To Buy A Good Business At A Great Price - the most widely used reference resource and strategy guide for buying a business.

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About The Author
Richard Parker is the author of: How To Buy A Good Business At A Great Price, the most widely used reference resource and strategy guide for buying a business. He has purchased ten businesses in his career and has helped thousands of prospective buyers worldwide learn how to buy the right business for sale. He is also founder and President of Diomo Corporation - The Business Buyer Resource Center.

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