March 30, 2016

Due Diligence Checklist for Investing in a Business

Entrepreneurs with a startup often ask for my advice on how to seek funding from investors. I find they often fail to understand the due diligence process. To help entrepreneurs prepare for the due diligence process, I created a presentation, "Due Diligence Checklist for Investing in a Business," which is segmented into six parts: (1) General Corporate Compliance/Organizational Information, (2) Financial and Tax Information, (3) Employment and Labor Matters, (4) Business Contracts and Commitments, (5) Intellectual Property, and (6) Equipment and Personal Property.

Entrepreneur magazine, through its "Small Business Encyclopedia," defines 'due diligence' as "a reasonable investigation of a proposed investment deal and of the principals offering it before the transaction is finalized to check out an investment's worthiness; generally performed by the investor's attorney and accountant."

I hope this post will provide entrepreneurs with insights into the verification requirements investors may have when assessing the risks of investing in a business. What additional information do you recommend adding to the checklist? Do you have any recommendations or lessons learned on utilizing the due diligence process effectively?



Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

1 comment:

  1. This is helpful stuff. I should have read it before I tried to do business with an outfit out of Texas!

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