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Due Diligence

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Definition:

Due Diligence is the process of evaluating a prospective business decision by getting information about the financial, legal, and other material (important) state of the other party.

Due diligence is used most often when buying a business, as the buyer spends time going through the financial situation of the business, legal obligations, customer records, and other documents. The prospective buyer wants to validate his/her opinion of the business to see if it is truly a good decision.

If you don't do your "due diligence" in a business situation, you may end up buying something that isn't as you thought it was, or you may end up in a business relationship that will cause you trouble. It may be costly to perform due diligence, because it usually involves the services of a CPA and an attorney, but it's certainly worth your trouble.

Due diligence is a process which includes detailed review of all aspects of a business or a situation, including financial, legal, insurance, technology, and marketing/sales/competition, as well as general company information. Read more about the due diligence process.

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