The Head & Shoulders Diligence Self-Check
The throwback Head and Shoulders shampoo tagline was: You never have a second chance to make a first impression. And if that isn’t a motto for diligence, we don’t know what is.
Run through diligence resources (ours, or others you have) and, for each question or section, ask yourself, “Do we know where to find this information? Can we produce these documents? How would we respond to this?” That type of preparation shows that you’re putting thought and care into the process and, ultimately, helps build trust from the first impression.
If you don’t want to do a full diligence process on your company (and we get it), here are seven questions to help you get organized. We recommend gathering this information in the six to eight months before you intend to put a deal together.
Is the equity capitalization table up to date?
Can we provide documentation supporting the equity cap table and company history?
Do we have a current employee handbook?
Is our intellectual property secure? Do we have the necessary registrations in place (and updated, where necessary)?
Do we have minutes and organizational history for our business so a third party can understand how the business has evolved over time?
Can we provide valid, current copies of all material contracts?
Do we have and can we produce written agreements with material vendors and suppliers? If not, is there an explanation for why and a way to document the operating history between the business and these partners?
A few notes. First, there are a lot of reasons why you may not be able to sell your business, some of which are addressed above, and some of which are more structural. When we say “clean,” we don’t mean you should gussy something up or present something that’s not true. But there’s a lot of value in getting organized before you go to market or start a deal process.
And, sometimes the most valuable answer to a question is “I don’t know” or “I know we should have that, but I don’t think we do.” It’s honest, it’s self aware, and it helps to establish trust in relationships. It can also be one of the reasons you are looking for a partner.