By Susan C. Hammond
If the advisors for someone who wants to invest in or buy your company walked into your office today to start their due diligence, what would they find? Are you ready to provide all the information they need to determine that your business is worthy of their time and interest? And can you do so in an efficient manner that shows that yours is a well-run organization? In short, are you ready for a pain-free due diligence process or will it be a torture for both you and the folks on the other side of the table?
Could you, for example, provide a well-thought-out business plan to help the due diligence team understand your business and see its growth potential? Could you provide up-to-date and accurate financial data? Are your client and vendor contracts well documented? Are personnel files in good order? Do you have non-compete and non-solicitation agreements with key employees? Is your stock option program in good shape?
These are only a few of the financial and operational infrastructure elements that need to be in place well in advance of any effort to sell your business or attract investors. Of course, the best time to put this infrastructure in place is when a company is started, but that happens all too infrequently. Most entrepreneurs are too busy getting the first product out the door to focus on building a solid infrastructure. And as the years pass, many business owners continue to skimp on these areas to keep costs down. However, ignoring the elements of a good infrastructure ultimately lowers the value of a company and, in some cases, can jeopardize a potential sale or cause investors to say no.
In addition to the areas mentioned above, some of the other infrastructure elements that should be in place prior to a due diligence process include:
Paying attention to these and other infrastructure components will lead to a smooth due diligence process that ends with smiles on both sides of the table.
Summer 2002 -Volume 12, Number 3