Due Diligence when You Buy Websites

Due Diligence when You Buy Websites

Reprinted with permission of VotanWeb.com

Due Diligence is the period when you will be able to access the company's books and records to verify that all of the information that you have been told thus far is true and accurate. Most often, people unwisely believe that Due diligence is simply the time to verify the financial position of the company. While this is true to some extent, a proper and effective Due Diligence goes way past the financials. Sure, you want to be certain that what you have been told is true but realistically even if the numbers are exactly as they were presented to you, then what? All you would have is a confirmation of the past but absolutely no inclination of what the future may hold for the company or the industry.

The Right Approach To Due Diligence

Is this the time to look for things that are wrong with the business? Is this the time to strictly verify numbers? Is this the time to disprove what you have been told by the seller? While each of these approaches is somewhat valid none are absolute. Sure, you will want to employ a part of each of these strategies but an effective Due Diligence is when you can really "check things out". Without question, your approach is to use this period to determine whether or not the future looks bright for the business and the industry. To do so, you must investigate far more than the financial aspect. Sure, the various financial statements will give you a picture of the past and perhaps a glimpse of the future but the past is over and done with. You must thoroughly review the company's sales, marketing, employees, contracts, customers, competition, systems, suppliers, and legal and corporate issues. You want to complete the Due diligence period knowing exactly what you are getting into, what needs to be fixed, what the costs are to fix them and if you are the right person to be at the helm to put the plans in place to make a great future for the business. In other words, learn everything before you buy!

How Long Do You REALLY Need

Every seller and every broker working for the seller will try to negotiate the shortest Due Diligence period possible. I have heard situations where this was limited to a week or so.