Due diligence is an investigation of a business or person prior to signing a contract, or an act with a certain standard of care. It can be a legal obligation, but the term will more commonly apply to voluntary investigations. Due diligence is a process that is used to thoroughly research a business you’re considering for a joint venture. It may involve a number of steps, including legal obligations, research and investigations into a company.
It’s typically used by venture capitalists considering an investment into a startup company. However, it is also an essential process for anyone who is considering a partnership with another individual or business and wants to ensure that union is a success.
What is Included?
When you begin the due diligence process with a potential JV partner, there are a number of documents to research:
- Corporate records
- Financial information
- Background checks of business and owner
- Contingent liabilities
- Business plan
- Sales and marketing records
While this is a fairly comprehensive list, it is by no means exhaustive. For example, if your purpose is to ride the coattails of a larger, more established business; take some time reading online reviews of the company, its service, and the products it provides. The last thing you want to do is enter into a partnership with a company that has a poor reputation with the general public.
Christian Fea is CEO of Synertegic, Inc. A joint venture marketing firm. He exemplifies how to profit from Joint Venture relationships by creating profit centers with minimal risk and maximum profitability.
In addition to reviewing a company’s business plan; find out what the company expects from the joint venture you’re looking to start. Ask potential partners what their intentions are for the joint venture to ensure you’re both on the same page with the terms and benefits. Find out what types of marketing strategies the company has used in the past and which advertising tools they are most comfortable with to compare with your own advertising strategies.
It’s important to note that in the case of venture capitalists, the large majority of potential relationships that are investigated do not make it to the final contract signing. Issues may arise through the due diligence process that give pause to those ready to invest their money into other businesses. The same might be true for joint ventures that are properly vetted, but this should provide peace of mind in knowing the companies that do pass muster would be more likely to provide a mutually beneficial partnership.
Using due diligence to properly research potential JV partners is an important step in any successful arrangement. Keep in mind that your joint venture may be designed to go on for some time and involve a multitude of marketing strategies and shared financial arrangements. When you take the time to thoroughly investigate a company before agreeing to a professional relationship, you are less likely to face unpleasant surprises throughout your partnership.
Article courtesy of Christian Fea is CEO of Synertegic, Inc. A joint venture marketing firm. He exemplifies how to profit from Joint Venture relationships by creating profit centers with minimal risk and maximum profitability.