Due Diligence: The Starting Point is Knowing What You Want

We practice due diligence primarily to manage the risk of making poor decisions and wasting resources.  When risks are low, such as when experimenting with a new flavour of chewing gum, we don’t give much thought to spending money, because if we’ve made a poor decision and the new flavour is not to our liking, we haven’t lost much.  But if we make a poor decision in selecting our office lease or IT provider, the cost of a mistake could seriously affect our business.  This is why due diligence is so important.

Determining what you want can be the most difficult step in the transaction process, but it’s also the most important.  And being vague about it is not sufficient. Before making a major decision, take time to write down everything you can think of that you want to have or have happen as a result of your decision. Then prioritize these items into 3 categories: Essential (Must have, no exceptions); Very Important (if at least 60% are not possible it’s no deal); and Wouldn’t it be Nice If (bonus items worth considering).

With this as your check list, you’ll know what questions to ask and be better able to judge whether a given provider can satisfy your needs or not, and it will protect you from making snap decisions that could cost you over and over again in the months and years to come.