Get ready for due diligence
Get ready for due diligence
2-min read
Whether you are raising capital or looking for an acquirer, being ready for due diligence will help you close a deal faster.
The more back and forth you have with potential investors does not necessarily mean you’re more likely to make a deal. Many times, investors keep coming back with questions because they don’t have all the information they need.
Minimize the back and forth and streamline the process to save both of you time and effort.
If you’ve been reading the last couple posts, I’ve covered getting help from your network and how to avoid burn out when looking to sell your business. The materials you need to prepare for raising capital are the same as selling your company. Let’s go over what those are.
First, go back and make sure you follow my tips on making a killer one-pager. This is a shorter version of a pitch deck intended to give all the essential information and weed out non-qualified or uninterested parties. Once you’re past the one-pager stage with a lead that you feel good about, you’ll want to give them access to your data room.
What is a data room?
This is a protected shared folder that has all your documents in one place. You only share this with folks that you have vetted.
Here are the contents I recommend:
Org Chart – (even if it’s just you) you want to show who is in leadership, what their shareholder or employee agreements and voting rights are and what their role is.
Cap Table – show this as a summary of the legal agreements you’ve made and the share distribution for owners/investors
Existing notes or term sheets – any and all current investments into the company, those agreements go here
Financials
Latest 12 month P&Ls
Latest 12 month Statement of Cash Flows
Pro-forma – show month-by-month for the next 12 months
Distribution List – this is a breakdown of who you sell through, so list it by distributor, then by DC then by list of stores
Other docs
Articles of Incorporation
Trademark – show your current USPTO listing
Food Safety certificates – wherever your products are made, you want to have these docs
Compliance & Regulatory – all food labeling approvals and certifications go here
Those last few Other Docs get overlooked all the time because they are things as owners and founders we do once and maybe renew annually and forget about -- don’t forget!
The process of getting a Term Sheet or Letter of Intent from an investor/acquirer is never easy, but with good preparedness you’ll be doing yourself a huge favor.
Good luck!
All my best,
Jennifer
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