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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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