The Best Way to Kick Off Due Diligence?

What’s the best way to kick off a due diligence process?

There’s a reason “doing due diligence” is an entire industry.

There’s a reason it’s good to have a well-seasoned deal team.

There’s a reason it’s good to dive into the world of small biz acquisitions with an army of peers to help support you.

Doing due diligence is HARD.

It’s often served with sides of complex lingo, deep financial analysis, and often, sheer information overload — especially if you’re on your own.

“I want to project manage this in the best way…”

That right there was Evelyne speaking.

She’s an amazing community member who recently started going through a due diligence process on a business she’s eyeing.

“What’s the best way to kick things off? I’m tempted to send a full list of all the required items, but would that overwhelm the seller? Is there a song and dance to this process?”

Here’s what the community had to say:

Yoyo: “Requesting your full list of due diligence documents upfront is pretty typical, especially if that was addressed in your LOI. Once you receive the necessary documentation, you can start your due diligence ASAP. What you’re looking to diligence will determine what you request. Minimally the financials but typically also customers, expenses, and employees as well — things related to the biz ops.”

Alex: “A checklist will likely be welcomed. When we were going through the DD in being acquired, it helped me and my partner to prep the docs and ensure we had what they were looking for in our Google Drive deal room. We did push back on some things that were obviously boilerplate and made them look a little amateurish by not checking their own list to note that some things on the list obviously didn’t apply. So taking the time to verify the items you need will go a long way.”

Dan: “Here’s a snapshot of how I was approaching it for the biz I was under contract to buy. A few suggestions would be:

1. Create themes for each week.
   
2. Identify the “critical path,” i.e. identify what you think are the most risky things when it comes to derailing the deal and focus on them first.
   
3. Keep a budget for each item.
   
4. Be flexible as you might need to adjust this as you get going.

But step one is really just trying to organize like I noted in items one and two — what are the most risky things and the most time-consuming things and get started on those ASAP.”

Here’s how it went…

Per Evelyne, “Just following up on this to say I 100% recommend sending the full list of DD items ASAP. There’s great momentum on moving things forward, and for those items that we’re getting pushback on, we simply have more time to build trust and work on trying to convince them to give us access.”

But wait, there’s more…

✅ Resource 1: Another member, Andre, recently shared a quick high-level resource on biz-buying due diligence from our friends at Live Oak Bank.

✅ Resource 2: We have lots more where that came from in our own due diligence checklist.