Marketing Due Diligence Checklist – What You Should Know?

Building a profitable company seems all fun and cool, especially when you watch how some top-level serial entrepreneurs build one from scratch. If you’re like most people, you would want to figure out the growth potential and market position of a company. However, to do that, you need a good grasp of marketing due diligence – and you can take it a step further by looking at some marketing due diligence checklist.

But what is market due diligence, and what are some principles of due diligence? Well, here is what you need to know.

Market due diligence (or commercial due diligence) is pretty much the evaluation of a company’s growth potential and market position. You can’t do it by merely looking at the company’s information. Don’t get it twisted – the company’s information plays a role. But the findings in a market due diligence is not based on the company’s information. It involves gathering reliable data from leading industry experts, customers, competitors, suppliers, and third-party market players.

If you’re active in a niche market, you’re better off gaining from the perspective of lost accounts, prospects, customers, third-party market experts, and direct and indirect market competitors. Every opinion you get from relevant players is important, and you’re better off actionable insights from these players.

In a nutshell, market due diligence offers a more robust, future-centric, independent, and reliable view of business prospects.

Later in this guide, some marketing due diligence checklists will be unvealed, and you will get to know the answer to one of the most asked questions – what questions should you ask during due diligence.

That’s not all…

You would get to discover the principles of due diligence and also read through some marketing due diligence checklists.

But before all that, you’ve got to understand how to do market due diligence?

How do you do market due diligence?

The process for doing market due diligence is not set in stone – there’s no clear-cut way to it. But regardless of your level of expertise or exposure, you’ve got to keep some things in mind if you want to do a thorough job when it comes to market due diligence.

Here are some processes you’ve got to keep in mind before starting market due diligence.

1. Review the business plan

You probably know that the structure and business management objectives, to a large extent, are determined by your business plan. Also, it helps you manage and measure your areas of focus. Therefore, one of the processes of performing robust market due diligence is by reviewing the business plan of your company. This way, you would get a bird’s-eye view of the company.

2. Assess how realistic the business goal(s) is?

A regular business goal is much different from a realistic business goal. If the business objective is realistic, then it’s pretty much feasible – and can be worked on. When it comes to performing market due diligence, you’ve got to check how realistic the business goals are.

What’s the pathway for accomplishing these business goals? Assessing how realistic the business goals are will help you get a glimpse of what’s possible, and what’s not. Moving on, it could help you to easily measure the potential worth of your business in the future.

3. Analyze the company’s position within the market

How’s the company performing, and how is it performing relative to other companies in the market? By merely analyzing the company’s position within the market, you get to pinpoint the perceived standing of the company in the marketplace.

Is the company an industry leader, or is it a startup? Analysis of the company’s position within the market will go a long way in establishing the company’s growth potential.

4. Predict the market’s future and the position the company has to play

Paying close attention to the market trend will help you forecast the future of the industry. But you don’t stop there – you’ve got to know the role of the target company in the process.

Let’s face it, companies that play a major role in an industry shift will pretty much be a leading name in no time.

Factors to know about market due diligence:

During market due diligence, you’ve got to put all these factors into consideration.

• Analyze the company’s relative performance and competitive position

How is the company performing relative to other companies in the industry? The answer to this question will help you have a glimpse of the company’s competitive position in the marketplace.

• Review the customer base

Who is the target customer of the company? The customer base, to a large extent, can provide a good glimpse of the kind of company you’re running. That’s not all, customer base review will help you know if the company has a sufficient customer base. If the customer base is not sufficient enough, it would be best to expand it.

• Access the possibility of reaching the projected revenue

Revenues are important – it’s what keeps the business rolling. And one of the primary objectives of marketing due diligence is to note the possibility of reaching the projected revenue. If the revenue can be reached, then the company will likely be in good shape moving forward.

• Investigate the pricing and margins

What’s the product (or service) pricing, and are the margins profitable? Profitable margins show strength – it’s a good sign.

You see, these steps pretty much make up the market due diligence process. And if you’re thinking of the principles of due diligence, here is what you need to consider.

What are the 3 principles of due diligence?

What comes to mind when you see principles of due diligence? Well, it could be a set of rules that governs the entire process – and these are in three stages – strategy, communications, and implementation stage.

1- Strategy:

The strategy stage involves setting measurable and realistic goals. As a key player in your industry, you’ve got to constantly refine your brand and proposition, and product positioning. And if you want to do a good job at that, then following a robust market research process is of the essence. Also, don’t ignore adopting right marketing strategy tools and techniques.

2- Communications:

The communications stage is pretty much focused on a robust research strategy. It involves planning, using tactics that catch attention, and good budgeting.

3-Implementation:

The implementation stage is the action stage. Nothing beats action! If planning and effective communication is not backed by action, then you’re in for some problem. Implementation involves the evaluation and measurement of success. If you’re keen on commencing the next cycle of your marketing program, then you’ve got to keep a close eye on your implementation stage.

That’s pretty much all you need to know about the principles of due diligence.

What questions should you ask during due diligence?

What checklist of questions should you ask during due diligence? There is no fixed set of questions. But if you’re a newbie, you’d discover some key questions to ask during due diligence.

Marketing due diligence checklist not to be ignored!

Marketing Checklist may be easy but market due diligence is hard work – and as such, there are lots of issues and questions that come into play. As part of the process, you’ve got to have a good grasp of some market due diligence checklist. Yes, countless issues can be studied using market due diligence. If you’re looking for some questions to include in your market due diligence checklist, here are some primary questions you should ask during due diligence:

Checklist questions about the company:

• Who is the founder (or owner) of the company?
• Do you have a good grasp of the company’s organizational structure?
• The company’s shareholders, who are they? And what percent share does each shareholder own?
• What are the company’s by laws?
• What’s the company’s article of incorporation?
• Who occupies the company’s senior management team – what are their salary, job title, and years in position?
• Where are the company’s minutes from board meetings, and other relevant documents like the recent annual reports?
• What are the company’s employee benefits?

Checklist questions about finances:

• What are the company’s financial statements from previous years?
• Is the company’s gross profit margin increasing or decreasing?
• What’s the company’s debt (if there are any)?
• What’s the company’s financial model?

Checklist questions about products and services:

• What’s the company’s product (or service) model?
• What are the strengths and weaknesses of the company’s leading competitors in the industry?
• Who are the company’s suppliers and vendors?
• What are the profit margins and cost of your company’s products (or services)?

Other questions worth including in the market due diligence checklist include:

Checklist questions relating to your customers:

• Are your customers satisfied?
• What’s the probability of your customers seeking an alternative source of supply?
• How do you stand in relative to your buyer’s acquisition criteria?

Checklist questions relating to your competitors:

• Does your business differentiate significantly in relation to your competitors, and does it mean a thing to your customers?
• Do your competitors’ capabilities, intentions, and strategies pose a significant threat to your business?

Checklist questions relating to your market:

• Is your market attractive as you think it is?
• What segments are the most attractive from a profit and growth standpoint?
• Are the market trends creating opportunities or threatening them?

Checklist questions relating to suppliers:

• What are the possibilities that a leading supplier will enter and integrate into your market?
• What are the supplier’s thoughts about your business and your competitors?

Checklist questions relating to strategy:

• Based on your research, what should be the vital components of your company’s growth strategy? And your response should be dependent on your understanding of your company’s strength in relation to your competitors
• Is your company’s strategic direction viable? And your response should be dependent on external market trends, your company’s internal competency, competitor capabilities, and your customer’s needs.

FAQs:

What is market due diligence?

Market due diligence helps in evaluating a company’s growth potential and market position. However, the information gathered should not be from the company alone. During market due diligence, you’ve got to gather information from all industry players – and these include customers, experts, competitors, suppliers, and relevant third-party participants in the marketplace.

What are the steps in due diligence?

For an effective due diligence process, you’ve got to follow steps like:

• Evaluation of the project goals
• Analyzing the business financials
• Document inspection
• Model analysis and business plan
• Final offering formation
• Effective risk management.

What are the types of due diligence?

During acquisitions and mergers, there are four basic types of due diligence. These are:

• Financial due diligence
• Operational due diligence
• Legal due diligence
• Tax due diligence.

Why is due diligence important?

Business merger or acquisition is arguably the largest corporate transaction. With due diligence, companies get to go through these acquisition processes from an informed position. The buyer gets to have a good grasp of the company’s weaknesses (or red flags), and also gets to easily forecast potential opportunities within the company.

Wrap Up

The worth of a company goes beyond the overall revenue generated by the business. You’ve got to take other factors like the customer base into consideration. And as such, you’ve got to come up with a marketing due diligence checklist. To do that, you’ve got to come up with answers to the big question – what questions should you ask during due diligence?

Before coming up with any questions, you’ve got to have a good grasp of marketing due diligence, and the principles of due diligence.

The good news is, marketing due diligence is not rocket science. By merely going through this guide, you’d have a good grasp of what it is, and how you can apply it when valuing any business.

Yes, the value of a business goes beyond what you see. But by coming up with some solid questions, you would fully grasp the value of any company in the marketplace.

Now you understand what market due diligence is, what business(s) will you what to know their value?