Preparing For Due Diligence

Some of these comments may seem obvious to everyone.   What I found going through the process of selling one of our businesses last year was that because we get so busy with our business sometimes we forget to think about the long term.

Due diligence is EXTREMELY disruptive. It will crush whomever you assign to work on the task.  It’s like an in depth physical that you have to pay 100% attention to.  So you definitely want to limit the amount of people involved.  If you are considering any type of transaction, whether it’s a sale, an acquisition, an investment, etc there are a few things you can have ready to make the process easier.

The information must be customizable.  I can’t stress this enough, the more data you have at the most granular level the better.  If you lump everything into big categories and someone wants to dig into some numbers it will be a pain.  For example, categorizing revenue by type and by client on a monthly basis is very important.  That way if you want to see things over a 3, 6, 9 month period or even annual it’s easy to pull the data.

Document as much as you can about your processes.  The only way for someone to get an idea about your business is by reviewing some documentation and meeting with the key executives.  It’s great if your management team has everything in their head’s and run a tight ship, but that also shows a lack of sophistication.  You’re better off spending the time to document things to show you have a process and that others can follow along.

Formally review and report on your business quarterly.  This type of reporting will do two things, first it will give you a history on the business and how it’s performing and second, it will show your command for managing your business.  The most important thing is to show you own/run your business not that it owns/runs you.  Show there is some intent and logic behind the decisions you are making because that will help the valuation process.  To read more about this check out: A Look Back

To learn more about our recent experience of selling our MSP practice please check out our latest eBook titled: 10 Lessons Learned From Selling Our MSP