You have got spent appreciable time pulling your marketing strategy collectively, contacting potential enterprise buyers, making administration shows and pitching your marketing strategy to potential enterprise buyers. Now you lastly have a severe investor who desires to conduct “due diligence” earlier than investing actual money into your small business.Nice! What’s “due diligence?Due diligence is a thorough examination of available facts, references, books, records, etc. of your business and business plan.And, what exactly should you expect during due diligence?Skepticism…Business investors want to be sure there are no skeletons in the closet and that your venture is not the next Madison Priest “black field know-how” — a revolutionary technology that claimed to allow ordinary phone lines to transmit data into people’s homes at rates faster than fiber optics. By staging impressive demonstrations, Priest convinced private business investors and seasoned companies, such as Blockbuster and Intel, to invest money in his venture. In the end, Priest’s ‘magic box’ was nothing but a high-tech hoax.In addition to a detailed analysis of your financial statements, business investors will hone in on four key areas: finance, management, manufacturing, and marketing. Specific concerns in each area are as follows:FinanceCash. Cash is king. It’s the lifeblood of all businesses – start-up or on-going businesses. Business investors know this. They will spend the time understanding your cash flow assumptions and, if you’re an existing business, they’ll analyze your cash management practices. Poor cash management or shaky cash flow projections are immediate red flags.Profitability. Expect investors to compare your actual or projected gross margins from year to year. This provides a quick indicator of your historical or projected manufacturing efficiencies and pricing environment. It can also highlight potential control issues, excessive overhead, or under pricing strategies to capture market share.Bank problems. Out of compliance financial ratios, scrutiny from banks, or suspect bank relations – personal or business – are all red flags to business investors about how you manage your financial affairs.Outdated financials. The lack of monthly financial statements or detailed cash flow projections or, for an on-going business, statements that are not prepared on time are all indications of a loosely run operation or a lack of planning.ManagementContinual crisis. Business investors watch closely for signs of weakness in you or your management team. Constant interruptions by emergency phone calls and demands for immediate decisions are signs of disorganization and lack of management.Substantial changes in key personal. Unusual turnover in key management positions can be viewed as a lack of leadership.No changes in senior management for many years. An established company with little or no changes in the management team can indicate a stagnant business, not current in new methods or processes, or a very autocratic management style.Lack of pride or enthusiasm. Seasoned business investors can just sense the true tempo and spirit of an operation and its management team. Ask them how they do it and they’ll tell you it’s a sixth sense or gut feel. Nonetheless, it is something they are looking for and expect to see and feel.ManufacturingOutdate methods and processes. Your manufacturing and service methods and processes provide a quick indication of your ability to compete in the markets you serve and shift gears if the business doesn’t go as planned. Even if you’re a start-up, business investors will want to know the methods and processes you plan to use to manufacture your product or provide the services you plan to offer.Rejects. If you are already in production, investors expect you to know your reject rates, the problems causing them, and the quality controls you have in place. How you handle rejects is an important issue to business investors. Remember, rejects are not limited to only production rejects. They also include missed service calls, late deliveries, and other process failures.Just in time (JIT). Inventory is often the first place business owners and entrepreneurs get into trouble. Too much of it and you can quickly run out of cash; too little and you’ll quickly start missing deliveries and losing customers. How well you manage inventory and understand it is a key strength business investors are looking for in the management team.Sales per employee. The measure of overall productivity is a good, simple benchmark investors can use to measure your historical or projected performance against other companies in your industry. Questions like: What is it that you plan to do differently than your competitors to allow you to use the number of employees you use or plan to use? Why do you think you can earn more or less per employee than the average for your industry?MarketingMarket share. Be ready to compare your expected market share or changes in it to your competitors. Remember to only measure the relevant markets you serve. Also, avoid justifying your market share by taking small percentages of extremely large markets. “Our projections solely assume we get 1% of this billion greenback market” is likely one of the most meaningless statements a enterprise proprietor or entrepreneur can say.Commerce exhibits. Traders can be within the exercise and curiosity your organization’s sales space generates at commerce exhibits in comparison with your competitors. Some could even wish to attend and observe the following commerce present you attend. Be sure you take footage, movies and conduct buyer surveys to show and help the curiosity and exercise surrounding your sales space.New merchandise. What’s the share of latest services or products that generate future gross sales? How typically will new services or products should be launched to take care of your market place? What’s your success charge with new services and products?Enterprise buyers are continually attempting to smell out signs of hassle. It is essential that you simply by no means mislead or deceive them. Most buyers have in depth enterprise expertise and frequently see or have seen many alternative companies and industries. The questions they ask typically stem from their actual world experiences. That is why it can be crucial to not get defensive by their questioning.Be ready when potential buyers wish to get behind your marketing strategy. Use this record to conduct your personal overview of your small business. Then, like many profitable enterprise homeowners and entrepreneurs, take the time to faucet into the information and questioning enterprise buyers have to supply to enhance your small business and put together for future investor conferences.