Performing a thorough due diligence on a potential acquisition is one of the most important tasks that a buyer needs to do when making a purchase decision. We’ve put together a list of items that buyers will want to investigate when talking to a seller.
This is part of a large series. Be sure to scan our Buyers Blog for the category Due Diligence.
In the previous blog posts we performed the Corporate Overview section. Our next section is to review the Sale Process. The first step in the Sales and Marketing portion of your Due Diligence is Sales Activity. The purpose of this section is to verify the information that they seller has provided regarding contracts and to understand the sales pipeline.
D. Sales Activity
– Determine the amount of ongoing maintenance revenue from standard products.
– Obtain copies of all outstanding proposals, bids, and offers pending award.
– Obtain copies of all existing contracts for products or services, including warranty and guarantee work.
– What is the sales strategy (e.g., add customers, increase support, increase penetration into existing customer base, pricing, etc.).
– How does the company promote its products and services (advertising, trade shows, etc.)?
– What is the structure of the sales organization? Are there independent sales representatives?
– Obtain the sales organization chart.
– How many sales personnel are in each sales position?
– What is the sales force’s geographic coverage?
– What is the sales force’s compensation, split by base pay and commission?
– What were the sales per salesperson for the past year?
– What was the sales expense per salesperson for the past year?
– What is the sales projection by product for the next 12 months?
– Into what category do customers fall – end users, retailers, OEMs, wholesalers, and/or distributors?
– How many customers are there for each product, industry, and geographic region?
– What is the average order size?
– Does the company have an Internet store? Does the site accept on-line payments and orders? What percentage of total sales come through this medium?
– What is the structure of the technical support group? How many people are in it, and what is their compensation?
– Does the company use e-mail for marketing notifications to customers?
– What are the proportions of sales by distribution channel?
– How many customers can the company potentially market its products to? What would be the volume by customer?
– What is the company’s market share? What is the trend?
– Are there new markets in which the products can be sold?
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