Why You Should Run A Background Check Before Selling Or Buying A Business

It’s A Wise Thing To Do

Background checks are an important part of big business, and they are definitely something smaller operations need to pay attention to. Think of the background check as a basic feature of selling or buying.

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If you’re selling a business to an unscrupulous individual, you could end up losing your legal claim on that business, and the courts might not be able to do anything. If you’re buying a business from an unscrupulous individual, the same thing may happen. Once that paperwork is completed and notarized, you might not have any recourse.

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In a nutshell, these are the main reasons you want to work with some sort of background check service in advance of the acquisition or liquidation of a business. However, there are a lot of unconsidered collateral benefits which also dovetail from quality background checks, and they’re worth considering.

More on the topic: How to Check the Background Of a Potential Buyer

In this writing, we’ll go over a few commonly overlooked reasons such moves make sense. Granted, there are always situations which act as outliers. Especially if you already know who you’re dealing with at a personal level, such tactics can be foregone. However, sometimes even if you know someone, it’s worth double-checking whatever story they’re telling you.

1. Your Reputation Professionally

Say you sell a company to a fraudulent individual who runs it into the ground, then blames you. Perhaps you’re running a local advertisement service, and the person who buys doesn’t have the skill you did. Now you’re running another business, but this guy is using your old operation to cast aspersion on who you are, and what you do, as retaliation.

Or maybe he starts using that business as a "front" and sends legal authorities to you. Granted, some of these behaviors aren’t something even the best background check service could identify in advance, but past behavior tends to predict future behavior. People act in accordance with the character that defines them.

With a solid background check in advance, you can determine who you’re dealing with, and avoid any sort of legally binding agreement with individuals that may collaterally undermine your professional reputation.

2. Legal Realities: You Could Buy Or Sell Yourself into Complicity

If you buy a business that makes a profit by running some illegal operation off the books and under the table, when the boot of the law comes looking for something criminal to kick, you might be the target it settles on. A form of this happens when big companies get convicted of fraud. All of a sudden junior-level employees get huge promotions.

When the illegal activity comes to light, those individuals who received such swift promotions are thrown to the wolves legally. Basically, they become fall guys - while it’s hard to verify specific instances of this, all sorts of white-collar ghost stories about this specific scenario surround the Enron scandal. Sometimes a company that seems like a great deal is cheap for a reason, and a background check could save you from associated consequences.

It may seem like something out of a movie, but there are definitely situations where someone selling a business is doing so because they’re looking to get the "heat” of the law away from themselves.

Meanwhile, if you’re selling a business to an unscrupulous individual that obtains assets illegally, then the ink on the sales contract could be dry and the money in escrow when that individual is requisitioned by the law, and suddenly you’re out all that money. You shouldn’t have gotten to that point, but fraudsters know their craft. Background checks help you avoid such issues.

3. To Reassure Buyers Or Sellers

People who are straightforward will expect that you’ll use some sort of background check service to vet them. Whether you’re selling or buying, they’ll see you dot your "i’s" and cross your "t’s" with maximum effort. Accordingly, they’ll be more inclined to trust you, and you may be able to come to a price agreement closer to the true value of the company in question.

4. As Additional Insurance For The Sale

Just as working with a qualitative background check service might reassure those who are buying from you or selling to you, when you run the check you’ll likely give yourself a greater measure of assurance as well.

That assurance is a form of insurance, in that you know a certain aspect of the sale is as objectively legitimate as can be determined professionally.

5. To Discourage Unserious Persons

There are situations where you’re going to have people that aren’t interested in buying or selling at all, they’ve got some collateral objective built around information gathering or a similar undertaking. When you get to a certain point in back-and-forth deliberations with this individual, presenting a background check service could dissuade them from wasting time.

It may even be worthwhile to drop hints such checks are coming right at the start; that way you’ll keep from "treading water", as it were, in the pointless back-and-forth. A great way to do that is to drop the name of the company who does the checks; just be casual about it, and try to get that name drop in as early as you can in the deliberation.

Follow this link for more info on notable background check services that can help you determine whether or not a selling or buying situation for a business involves trustworthy parties. If the individual isn’t dissuaded when you inform them of the check, they’re likely legitimate.

6. To Give You An Edge In An Acquisition Or Sale

Something else you can do with the right sort of background check service is to learn about potential business associates in advance. Say you’re looking to sell to a certain "big fish", and you don’t know which angle will most efficiently serve your purposes. Running a background check on them can reveal key information that might give you an edge in your sales pitch.

Conversely, if you’re selling, you might be able to get a more realistic idea of what sort of price the customer will run away from, and what that individual is willing to work with. Either way you slice it, more information tends to provide more of an edge. With any sort of sales, the larger your edge, the better the outcome tends to be. So find ways of getting that edge.

7. As A Way Of Confirming A Person’s Self-Representation

It could be that you’re dealing with remote individuals, and there’s no way to directly confirm that they are who they represent themselves to be.

In such situations, working with a background check service can help you assure you’re actually dealing with the right person. People lie all the time; if they’re pretending to be a buyer or a seller, you can learn enough to expose them.

8. To Save Time And Money

Because selling a business tends to be one of the more involved selling situations out there, you can expect the process to take a while. It might take a few weeks, it could take a few months - according to the link, averages tend to be in the five to ten month range. That said, some mergers or acquisitions take years of back and forth.

The larger the business, the more details are involved in high-profile sales. Accordingly, if you’re dealing with a "lemon" of a buyer or seller, you want to know immediately. As the old saying goes, time is money. Especially for high-level sales persons, that rings true. Wasting time could lose the sale.

In contrast, working with a solid background check service helps assure you’re spending your time wisely with serious buyers or sellers. You can accordingly focus your energies on those that will be most likely to represent a profitable outcome.

Protecting Transactions Both High And Low

Working with a vetted background check service can help you save time in sales, save money, confirm the identity of unknown buyers or sellers, give an edge during the deliberation stage of a transaction, discourage unserious persons, insure the sale, reassure parties buying or selling, help you avoid legal issues, and act as a means of protecting your reputation.

A lot of unexpected things can happen during a sale - almost every selling situation has a few twists waiting for involved parties to get serious. With large sales, this is especially true. High profile sales have an unspoken professional casualness. Collaterally, there tends to be more leeway for individuals who would take advantage to exploit honest, professional individuals.

On that note, it’s worth pointing out that sometimes professionals make it their business to undermine others. People are not always honest, there are plenty of situations where it’s up to you to call them on unscrupulous moves. With solid background checks to define the process, you can help protect yourself, your business, or your investment.



Published by ExitAdviser |

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