What is the product of Due Diligence?
When applying due diligence to your ventures, you’ve got to have skills in accounting and auditing. Some examples of questions asked or procedures are as follows:
-Does the business have healthy cash flow?
-By looking at the books, can you tell where the revenue stream is coming from?
-How reliable are its financial projections and what multiple is it placing on those earnings?
-Are profits going up or down?
-How big is the market for the company’s products or services?
-Is the market growing, shrinking or stagnant?
-Are there any major new competitors in or coming into the area that could negatively impact earnings?
-What kind of online presence does the business have, and how does it compare to its competitors?
-If the company has physical assets, are they valued correctly and fairly?
-Are there any hidden liabilities?
-Are the company documents complete? (Articles of incorporation, board meeting minutes, tax registration, etc.)
-Is the business up to date on its taxes?
-Does it lease property? If so, when does the lease end?
-What insurance information is provided and what is covered?
-Are there complete employee files including salary and benefits?