Think Like a Prospective Investor or Buyer

When you’re involved in your business’s day-to-day operation, it’s challenging to see flaws and areas that need improvement. To maximize your business’s value, you must look at it through the eyes of a potential investor or buyer. You must look at your company through an objective lens and be honest with yourself.

To achieve a successful investment, you begin by preparing to minimize the risk of a failed transaction and to optimize the valuation. Success starts with understanding that an investment or sale is a process. It builds from a constructive mindset and extends through a series of six disciplined steps.

Due Diligence and Company Documentation

During the investment and sale process, investors can ask to examine anything about your company. They will want to see company documents related to: financial details; tax matters; real estate assets and leases; intellectual property, employees and benefits; licenses, permits, and regulatory issues; material contracts; product or service information; marketing and customer data, any litigation issues; insurance coverage; and anything else that may be of relevance.

Due diligence involves a close look at your business. When looking to buy or invest in a company, investors will carefully scrutinize it from top to bottom before committing. Company documentation is part of the due diligence process. You can begin today to prepare for due diligence. You should complete your due diligence before approaching the market. Due diligence initiated by an owner is commonly referred to as “sell-side” due diligence.

You must determine the issues that might affect an investor’s valuation of your business and be prepared to address them since outsiders won’t have the same deep understanding and knowledge of your business as you do.

Start by gathering all relevant data. Business owners who are organized and can answer investors’ questions quickly and confidently have much higher odds of getting the sale price they want and closing the deal. Completing sell-side due diligence helps identify areas with value implications and issues to address before approaching potential investors or buyers.
Get a FREE copy of my guide, What You Need to Know: Your Seller Due Diligence Checklist. Click here.

 

Learn to look at your business through the eyes of a potential investor or buyer. Success begins with understanding that an investment or sale is a process. Collect company documentation and prepare early with your sell-side due diligence.