Practice Due Diligence When Acquiring Business Assets

Turning inventory into profits is the essence of capitalism. That's why owners and entrepreneurs struggle to acquire assets, like inventory and equipment, that can help them convert labor, raw materials, and ideas into money. Taking the time to acquire assets in a careful, measured way is what due diligence is all about. Whether you're buying inventory for eventual resale or vehicles for a transport firm, it's imperative to focus on getting value for every dollar spent. Review the following asset categories to learn more about smart acquisition.

Inventory for Resale

If you resell items to the public or to other commercial firms, make an effort to find several highly reliable sources and build long term relationships with them. Always have a designated storage location for everything you buy before taking delivery. That way, there's never a problem with security, insurance, and easy access to your goods. There's an age-old dilemma about finding the right order size when reselling goods to others. Because demand is impossible to predict with 100% certainty, attempt to buy enough product to prevent shortages but not so much that it exceeds storage capacity.

Fleet Vehicles

The due diligence process is part of the professional investing world, but it also plays a major role in the acquisition of fleet vehicles. In addition to creating a checklist of preferred features, business owners should work with reliable, well-known dealers or individual brokers who have experience locating the very best commercial cars, trucks, and vans in the local market. Owners need to find assets that meet their specific operational needs.

Companies that make deliveries by truck should use fleet management software to monitor on-time trip status, driver safety, maintenance needs, fuel expenses, and dozens of other relevant parameters. GPS-based solutions can solve challenges and inefficiencies in their operations. You can review a fleet manager’s guide that explains the benefits of GPS technology. Unlike many other purchases, vehicles can last more than 10 years when well-maintained. That's one of many reasons to expend time and effort during the acquisition phase.

Real Estate, Software, and Equipment

Never acquire real estate, which generally means land or buildings, without the help of a licensed, experienced commercial agent. Laws vary from state to state, but there are all sorts of potential hazards present in every real estate deal. There are things to know about selling real estate on the back end that you might not be aware of, but should probably know in advance of a purchase that a professional can help with. Hire a certified building inspector to look the place over and deliver a detailed report. The cost is modest compared to the value of the service. Spend time evaluating the appropriateness of the location for your company's purposes.

Get competent legal advice to find out what kinds of permits and clearances you'll need if the space will be used to sell directly to the public. Even service companies who see clients on site need to get the proper kind of insurance coverage before launch day arrives. Work with real estate professionals to examine the potential for renting the property as opposed to buying it. Sometimes it makes good sense to rent for a year or two to evaluate the space before making a commitment to buy. When it's time to buy equipment and essential software products, read consumer reviews and do free trials whenever possible before spending money on these items. Some IT service businesses spend the bulk of their investment capital on proprietary software.