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On-Going Due Diligence

Jun 30Danny Windsor

small_9189207176Virtually every business owner that goes through an eventual sale of their company will encounter a process known as due diligence.   A technical definition of due diligence is “research and analysis of a company or organization done in preparation for a business transaction (Merriam-Webster on-line dictionary).”  Any potential buyer of a company will perform an extensive due diligence of the business that is being considered for the purchase.  The main objective of this due diligence is to reveal any significant problems or weaknesses that could result in either the business not being purchased, a delay in the purchase, or a significant decrease in the desired purchase price.  Knowing this process will take place is extremely important to a business owner because in the coming Tsunami of baby boomer business’s that will be hitting the market for sale in the next several years, only those companies who are ready for this process will stand out from their competition, sell much more quickly, and sell at a much higher sales price.

How does a business prepare for the eventual due diligence process?  The key is to operate your company as if it is always in a state of on-going due diligence.  Our firm can help companies with on-going due diligence through “The Advance Due Diligence Process™” (Mills, p.79) which is explained thoroughly in our book, The Exit Strategy Handbook. Some of the areas addressed in our process that will greatly assist a company to be thoroughly prepared are as follows:

  • Customer Information
  • Intellectual Property
  • Software and Hardware
  • Insurance
  • Taxes
  • Financial Information

The above list is only a few of the areas that are addressed.  There is absolutely no reason for any business to not be ready to sell and get through a due diligence process much easier.  The resources and help are available.  Preparing now will not only result in a much higher value in the future, but an on-going efficiently run company now.

*Mills, Jerry L., (2013), The Exit Strategy Handbook

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