Due diligence is an essential part of any process whether you’re contemplating an acquisition or merger, buying new equipment, or just hiring suppliers. It’s crucial to be confident in who you do business with and it can help you defend your company from dangers.
As an entrepreneur, you need to understand the different kinds of due diligence and how they can be applied to your specific situation. In this article, we’ll explore five common types of due diligence that can be utilized across any industry:
Financial due diligence analyzes the financial records of a company and ensures the numbers are correct. This includes checking reports, assessing a company’s performance and investigating areas like debt, contracts and property.
Operational due diligence is focused on identifying issues that could affect a company’s future success. Operational due diligence can uncover potential risks that are not obvious, such as an absence of real estate, outdated technology, or an inefficient resource use.
Human resource due diligence is an comprehensive look at a company’s employees. This includes looking over all documents and information about a company’s employees like contracts and compensation plans, as well as any pending litigation. It also analyzes the company’s culture with respect to its values, perceptions, and working methods.