Due Diligence and Safety Nets By William CateIf you're an Angel Investor, you're an endangered species. You live in a high-risk environment. Many of your predecessors failed to take even
minimum safety precautions to ensure their survival. They didn't survive. If you follow their unwise investment policies, your bank balance is at serious and predictable risk.
An entrepreneur, without a business plan, shouldn't be taken seriously. If you invest in a business without a critical review of
company's business plan, you should expect to lose your money. The company's business plan is its roadmap to business success. If
roadmap is vague, success is very unlikely. Cashflow charts are to be ignored. You should expect that a successful business plan will require twice as much money as being sought and will produce half as much revenue as being projected.
Due Diligence is one of
U.S. Securities and Exchange Commission's solid recommendations to
investing public. It's in your best interests to verify each and every fact in any business plan, BEFORE you risk your money. A concise business plan with specific data makes it easy to verify
entrepreneur's claims.
Resumes
The Management Teams' education and work experience are important to
potential success of your investment. Business plan education claims, beyond high school, should include
name of
institution issuing
degree and
year in which
degree was conferred. The Due Diligence questions are
following:
1. Is
institution accredited by a recognized accrediting organization and did
person receive
degree in
year stated. 2. Relevant work experience should list
employer,
firm's address, a job description and
exact years that
person worked for that company. You should verify that each of these companies exists by getting their phone number from
phone company and then calling
Human Resources (formerly Personnel) Department and verifying
work record of
person. You can use
Net to get Credit Histories and Court records for each person on
management team. 3. The company's balance sheet should tell you how much money each member of
Management Team has at risk in
venture. It
Management Team isn't at serious risk of loss,
business plan usually fails.