‘Due diligence’ vital in business

One of the most difficult skills to teach is to think critically, honestly and without bias.

To frame an issue in the correct context, with the most important facts, and to arrive at the best answer is the desire of investors, business owners and managers. The process of arriving at a wise management or investment decision through this process is often referred to as due diligence.

The term "due diligence" originated in the public markets and relates to the offering of public securities. Federal law requires companies offering securities to disclose in a prospectus all information that would be necessary to make an informed decision. The prospectus may not contain any material misstatements or omissions.

Over the years, due diligence has become a common term in the investment process for new and emerging businesses. In making a funding decision, a potential investor will investigate and analyze a company to determine if it meets investment criteria. This due diligence process may include a review of the management team, product (including intellectual property), market, competition, industry, economic environment, financials and business practices.

By Gary Williams
Brigham Young University

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