When we do due diligence, we will look at several aspects of the prospective business or product. Below is a business due diligence checklist to help you work through the process. This checklist is geared more toward acquiring a business, but we customise the process on a case to case bases
Financial Due Diligence
- Looking at past annual and quarterly financial information, including:
- Income statements
- Balance sheets & Cash flow
- Review sales and gross profits by product.
- Accounts receivable
- Rates of return by product
- Breakdown of real estate and equipment
- Listing the name, model number, and valuation of all equipment and furniture.
- Noting the size and current market value of land or buildings
- Reviewing past projections and actual results
- Looking at the owner’s future projections, including:
- Quarterly and annual projections
- Projections by product
- Assumptions on which the owner is making projections.
- History of pricing policies and past increases.
- Summarizing of debts and their terms.
- Summary of all current investors and shareholders
- Business’s inventory
- How much inventory is on hand?
- What is the value of the current inventory?
Legal Due Diligence
Through legal due diligence we look at the legal contracts and other documents to look for hidden risks and lawsuits.
- All copies of contracts, including:
- Purchase agreements
- Distribution agreements
- Sales contract
Operational due diligence
Through operational due diligence we investigate the actual operations of the business, such as the business model, the market, and competition.
- Identifying customer patterns.
- Comparing the number of first-time buyers compared to repeat customers.
- Determine peak purchasing times.
- Segregating the popular items or services
- Identifying the popular price points
- Studying the business’s marketing.
- Identifying past and current marketing tactics
- Review the business’s previous sales and discounts, along with how well the promotions did.
- Go over how much the business spends on marketing and calculate the ROI.
- Learn the results of past marketing efforts.
- Compare the competitor’s products, costs, and earnings to those of the business you want to acquire.
- Conduct a market analysis.
- Research the demographics of the surrounding area and the business’s target customers.
- Study the geographic economic outlook.
- Find out who are the business’s competitors.
- Find out how people perceive the business.
- Learn what customers and potential customers, suppliers, and lenders think about the business.
- Research industry trends.
- Find out if the business’s industry is growing or slowing.
- Research profit margins for the industry.
- Learn more about the business’s competitors.
- Look at each competitor’s strengths and weaknesses.
- Determine any threats competitors pose to the business.
Human capital due diligence
Human capital due diligence looks at a business’s staff and management. It’ll investigate skills and qualifications or any gaps which when fulfilled will lead to efficiency .
- Get an organizational chart.
- Curate a list of current employees, including their positions, earnings, skills, and qualifications.
- Determine how employee wages compare to wages of people in similar positions in the industry and region.
- Get a breakdown of the company’s benefit plans.
- Learn about the business’s time off policies.
- Get estimates of the business’s projected staffing needs.
Product Due Diligence
Product due diligence allows for information about the product the business provides.
- Product listing & costing
- Determining how profitable each product is
- Mapping consumer preferences
- What added factors are demanded by the consumers
- Look at past and projected growth rates
- Investigate what enhancements have been made to products and what future enhancements are possible