Due Diligence

As mentioned yesterday, due diligence is the process of investigating and analyzing a possible investment or business with the goal to determine the proper risk versus reward scenarios. The more and credible the information is, the better the risk can be understood. Most people don't understand where or how to conduct this process or where to get the information.

Also, the source of the information is also key. You may have to discredit some information due to the fact that they may have a financial interest in the decision you make. It is always preferred if you can obtain independent information from multiple sources to assist in your decision.

The very first place to start is with the management or people making the ultimate decisions. What experience do they have in the industry? What is their track record? How long have they in their current and past positions? Do they have experience bringing a company public, or saving a drowning company, or launching new innovative products, etc? Whatever the situation is, the more information around those sets of facts is where to start. Next, check up on the key people around the decision makers. Do they have experience and the resources needed to carry out their defined roles. The bottom line, there are great ideas born everyday, but it takes so much more than great ideas to create wealth. The people involved will determine the success or failure of the endeavor.

There will be more on due diligence in future posts.

The discerning heart seeks knowledge,
but the mouth of a fool feeds on folly. Proverbs 15:14