The Four Buckets of Due Diligence (And Why One's a Goldmine)

Hey oh, acquirers! Welcome to your weekly newsletter that digs through dusty garages of data, peels back the tarps of tired listings, and finds you the golden nuggets of business buying wisdom so you don’t end up overpaying for someone else’s junk.

The Four Buckets of Due Diligence (And Why One's a Goldmine)

When I shared my due diligence approach with fellow business owners and searchers several of them said it was gold.

Due diligence is like rummaging through a garage sale: there are a few boxes you have to dig through, but one of them is full of hidden treasure.

So, we’ve got four buckets: Contractual, Financial, Operational, and Market due diligence. Now, I know the first two might sound about as thrilling as watching paint dry.

That’s why I let the pros handle them. I’ve got a trusty lawyer to sift through the contracts and an accounting firm to make sure the numbers aren’t doing any funny business.

Turns out, for this deal, everything added up nicely. Phew!

But here’s the fun part…my favorite buckets are the operational and market ones. These are where you get to play detective and uncover what makes a business tick (and where you can sprinkle in a little magic).

Operationally, I’m peeking under the hood to see if this business has the right people, processes, and model. Everything from how do they get customers to how do they service them.

Can I improve it?

Can I streamline it?

Is it running like a well-oiled machine or like that old car that needs a little love?

Then there’s the market due diligence, which is where it really gets juicy.

I’ve been on the phone with everyone from local competitors to general contractors just to get the scoop.

Turns out, by being a little nosy and curious, I found out that almost every bathroom remodel includes a frameless shower door and contractors are just itching for a new supplier.

So, just by chatting, I’ve already lined up some potential new customers before I even own the business.

Kinda like finding a $20 bill in an old pair of jeans that were buried at the bottom of my dresser drawer.

The Takeaway:

Don’t just crunch numbers or read contracts.

Get on the phone, build relationships, and get the real scoop on the market.

It’s a lot more fun and can open doors (frameless ones, in my case) before you even turn the key.

Happy discovering!