What is it and why you should prepare for it
According to www.Investopedia.com, Due Diligence (DD) is defined as follows:
- Due diligence (DD) is an investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to a sale.
- Generally, due diligence refers to the care a reasonable person should take before entering into an agreement or a transaction with another party.
If you decide to sell your business for example you will provide financial information and other details about your business to potential buyers. The buyers will then investigate your financial information and other details to validate the details and feel comfortable that things are as you say they are. This process is called Due Diligence (DD).
You can exponentially speed the Due Diligence process along with a little forethought and planning.
Look at your business as a buyer would and try to anticipate their questions and concerns. The longer the Due Diligence process drags on the more likely the sale will not go through.
If you are prepared and can provide quick answers to the buyers’ questions the more comfortable the buyer will feel and the quicker the deal will close.
Spend some time up front performing Due Diligence on your own company before you put it up for sale and you will greatly enhance the possibility of a successful sale.
The Exit Strategy Handbook from B2BCFO goes into great depth about the Due Diligence process and offers many tips and checklists about the questions buyers may ask. The checklists anticipate any issues in advance so that they can be solved BEFORE the company is put up for sale.
Please call me 707-529-3608 or email me at firstname.lastname@example.org if you like to discuss how we may help with The Exit Process and/or Due Diligence.