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Q.What causes a newly purchased business to fail?

A.While not all inclusive, there are 4 main reasons a newly purchased business will fail.

  • The purchase price paid was significantly over market value;
  • The buyer's due diligence procedures were inadequate;
  • A previously dependent asset was unable to function/survive without support (i.e. sales to related parties or below market debt); and
  • A change in business environment created unexpected problems.

For an explanation of "due diligence" click here.

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