What do potential buyers and investors want to know about your company? We go through the complete list.
If your company has captured the interest of investors or buyers, the due diligence process is
crucial for the valuation
. To become due diligence-ready, you need to be able to give a clear insight into the company’s finances and keep track of documents and agreements.
What you need to know before due diligence
Becoming due diligence-ready is about gathering all documentation about the company in one place. It is the total overview of the company’s financial status that is in demand. That overview includes the following fifteen parts.
1. Description of the company
When and why was the company started, and by whom? What does the business look like today? Spend a few hours describing the business to give potential investors and buyers an overall picture of the company.
2. The organization of the enterprise
How does the company operate operationally? Who is included in the management and how does the staff work? Make a description of the company’s organization, preferably both in writing and visually. Companies with a clear organization tend to have more satisfied employees, so be sure to document how you work – it can pay off.
3. Economic governance
How does the company work towards financial goals? How are these followed up? Financial control is easier in well-organized companies. Make sure that it is clear how staff and management work together to achieve set goals.
4. State of the market
What opportunities and challenges exist in the market today and in the future? Map the prevailing market conditions to make the due diligence process even smoother.
How are customer agreements set up? What customer structure characterizes the company? Document how the company handles its customers – after all, they are the ones who keep the business going.
Always ready for Due Diligence
A digital company binder helps your company to be DD-ready
6. Competitor analysis
What does competition in the market look like? What position does the company have in relation to competitors? In order for an investor or buyer to dare to bet, all the cards need to be on the table, even those that may make growth more difficult.
7. Forecast for the future
What trials may the company face in the future? What indicates that the company will flourish over time? Making a fair compilation of what the company’s future forecast looks like is a good way to show that you have an eye on the situation.
How does the production work? At what rate does the company produce and which stakeholders are involved? Regardless of whether the company provides products or services, production is an important element of the due diligence process.
9. Existing supply
What products and services does the company provide today? Describe the company’s offerings to give a complete picture of what constitutes the very core of the business.
10. Development of supply
What products and services can the company benefit from developing in the future? In connection with the review of the company’s existing range of products and services, you should review the development potential.
11. Investment needs
How much investment does the company need and why? Be clear about what the money will be used for and what effect the investments will have. If you are not clear here, you risk potential investors losing interest.
12. Agreements and other legal documents
What agreements does the company have with other stakeholders today? What do they look like? Having the company’s various agreements in order is important if you want the due diligence process to reinforce the image of your company as safe and reliable.
13. Annual report and financial statements
How has the company fared in recent years? Have the company’s annual reports and financial statements ready for several periods to be able to show the company’s financial status in an easy way.
14. Financial systems and calculation tools
What accounting software and financial systems does the company use today? Make a list of which calculation tools and systems the company uses to handle accounting, analysis and documentation.
How does the company work with sustainability? In today’s society, the climate issue and social responsibility play an important role. Document how the company works with these issues – they will become increasingly important over time.
How do I know I’m due diligence-ready?
Once you have gone through all 15 steps, you can feel confident that the right documentation is available before a due diligence. Many people choose to bring in an external advisor who can take a closer look at the documentation. It is perhaps mainly interesting in the event of an upcoming due diligence, but can also be useful if you are just starting to work actively with documentation. A financial advisor is used to due diligence assignments and can make valuable suggestions on how the company’s documentation can be further improved.
How often does the documentation need to be checked?
Review the list of information requested during due diligence at regular intervals to check that the company’s finances and business status are up to date. This way you know that the company is always due diligence-ready. Of course, it is best if you delegate the documentation responsibility to those responsible for the different parts of the company, so that you can easily gather the information when due diligence becomes relevant.
Using digital services is a more time-efficient way to become due diligence-ready. For example, you can take the shortcut via Boardeaser’s digital document archive with compliance function, which offers a safe and secure way to create order and order in the company.