Take Five #087: Detailed list of due diligence questions that sellers and potential buyers should answer, and more
Codely v2.0 public release is here
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What has changed in our latest release?
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All new features available for all public channel users
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Coding collaboration with over 200 users at once
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Take Five #087: Detailed list of due diligence questions that sellers and potential buyers should answer, and more
1. How to determine price and craft a winning offer when bidding on a business
Coming up with the price in the first place is the challenge, but you’re not starting completely from scratch:
1.) Unless you’re working off-market, a broker will have listed an asking price 90% of the time (so why on earth do they not tell you whether your bid is competitive?)
2.) If you’re doing things right, you’re not bidding for the first ever business you’ve analysed. As such, you should have a rough idea what market rates are for this type of business, or at least a general range.
3.) You should also be aware of what else you can buy for the same amount of money, which helps you figure out whether something is good value or not. This is very much an imperfect science though, as no two businesses are equal.
The difficulty is not from having no idea what the fair price is, but more:
1.) Figuring out where you sit in the order of preference if there are multiple bidders,
2.) If you want to bid below an asking price, how low can you go and still have a seller accept (and how low can you go without insulting them to the point of blowing up the deal).
3.) Understanding how to structure your offer. For example, if you’re paying less up front, you might be willing to pay more overall.
4.) Ultimately, making sure you aren’t paying more than a business is worth (again, very much an imperfect science).
Read the rest of Mastering Digital Acquisitions’ article here.
2. 7 ways to read and understand financial statements
3. A different take on year-end assessments and annual planning
As we gear up for the new year, it's time to rethink our approach to annual planning.
Traditionally, we've been told to
-review the past
-anticipate upcoming changes
-set realistic goals
-then, in a somewhat dubious twist, bump those goals up by 10-30%. Why? Because supposedly, it's expected that our teams won't truly stretch themselves without this artificial nudge
-finally, we pass these goals down for them to break into smaller steps and pass on further.
Why Traditional Methods Fall Short
But let's be frank, this method has a glaring hole. It assumes goals set from the top down will resonate with those who are actually tasked with achieving them. In reality, we often see better results when teams set their own targets, driven by personal investment and a clear understanding of why these goals matter.
Read the rest of Joshua Schultz’s post here.
4. Detailed list of due diligence questions that sellers and potential buyers should answer
It likely goes without saying that every transaction is different: Every company, industry, searcher, and investment opportunity presents unique considerations that in turn give rise to unique questions and areas for further due diligence.
With that said, over many years of evaluating countless acquisition targets alongside searchers, I’ve found that certain questions do indeed tend to apply more often than not. I’ve presented each of these FAQs in the blog post that follows, in hopes that they play a small role in how you structure your own due diligence process, and in turn how you think about the relative merits and risks of the opportunity in question.
If you’re a buyer, the list that follows can be thought of as a starting point for “Commercial Due Diligence 101” (excluding company-, industry-, and context-specific considerations). You may also choose to think of it as a basic checklist of items that you should include within the materials that you use to introduce any acquisition opportunity to your investors.
Find Mineola Search Partners’ complete list of questions here.
5. SBA lender offers up some SMB acquisitions market observations
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