The Adequacy of Pre-purchase Due Diligence in Independent Small Business and Franchising
Embargoed until: 2019-05-01
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This research reports an in-depth study of the due diligence activities that prospective independent small business operators and franchisees in Australia undertake prior to purchasing or starting up their businesses. Although academic literature and industry publications promote undertaking ‘proper due diligence’, there is a lack of empirical research into the nature of due diligence and its effect on business outcomes. Using a qualitative approach, 60 currently and formerly operating independents and franchisees were personally interviewed, exploring the diversity of approaches to undertaking due diligence prior to entering business. The research revealed that differences occur in both the type and amount of due diligence undertaken by independents and franchisees and highlighted further differences between current and former operators. In general, the due diligence undertaken by participants was relatively unsophisticated with few exceptions of rigour and planning. Where prospective independents and franchisees were entering business for the first time, their appreciation of business was naïve. A steep learning curve followed during which they often recognised flaws in their initial research. As a result of this qualitative in-depth research, we present a set of propositions regarding due diligence and a model for future testing on a large sample.
Australian Accounting Review
© 2017 CPA Australia Ltd (CPA Australia). This is the peer reviewed version of the following article: The Adequacy of Pre-purchase Due Diligence in Independent Small Business and Franchising, Australian Accounting Review, 2017 which has been published in final form at 10.1111/auar.12164. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving (http://olabout.wiley.com/WileyCDA/Section/id-820227.html#terms)
This publication has been entered into Griffith Research Online as an Advanced Online Version.
Accounting, Auditing and Accountability not elsewhere classified