why due diligence is important

Are you serious about your business?

Most people are missing the reason why due diligence is important. I am not a gifted entrepreneur. I have screwed up so many business ventures. And I’d like to say that those were lessons learned. But many times I wasn’t learning the right lessons, which is why I kept repeating certain mistakes. Totally avoidable mistakes.

why due diligence is importantIt wasn’t until my wife and I started working with our amazing real estate coach, Dennis, that we started to finally get a clue. He really had to beat me over the head before I finally started to think like an entrepreneur.

There’s no such thing as winging it…….

I can’t tell you how many entrepreneurs I see (including myself) who try to make a business out of rubber bands and paperclips. Imagine if you worked for NASA and they told you that you had to fly to the moon. Would you just go out the front door, walk in the overall direction of the moon, and just improvise until you get there? I’m willing to be you’d probably find your grave before you found the moon.

Going to the moon requires PRECISE UNDERSTANDING of how all the variables work. You have to do your due diligence in understanding……..
Where the moon actually is?
Why does the moon move the way it does in relation to the earth?
How can you measure it?
What are the laws of physics as they apply to space?
What are the laws of physics as they apply to aerodynamics?
Etc., etc. etc.
The reason a space shuttle can blast out of orbit without disintegrating or exploding, and then have enough fuel to travel to the moon, while simultaneously navigating a precise trajectory, and then reenter our orbit without burning up in the atmosphere is because THEY DON’T WING IT.

Everything in the space craft is backed by years of scientific research and refinement. Everything has a checklist, a system, a protocol, a backup plan, and emergency contingency. Assumptions are eliminated entirely.

Unfortunately that’s not how the average entrepreneur approaches it. It usually starts with an idea……and that idea is almost always an assumption. They like something, or they wish something was better. So of course they project their own personal preferences on the rest of the world, and assume that there must be a viable marketplace who shares the same opinion.

They may do a little brainstorming with some of their friends. Of course, all of their friends will tell them that it sounds like it’s a good idea. And not only are they now convinced that their idea is a good idea (because they really really like it), but they have now found another really really good idea on how to promote it.

But wait it gets better. They’ve also already determined who their ideal customer is (anyone who will pay for it), and they’ve figured out what the market will pay for it (whatever they think it’s worth), and they know that they are going to make a lot of money (without even thinking about a system to manage and track their transactions, their revenue, or their operating expenses.) And goals? Well they want to make a lot of money. That’s a pretty good goal right?

The secret to finding answers is to bother asking the questions…

Assumption- “People will love this.”
Due Diligence- “Let’s RESEARCH google ad words, magazine periodicals, industry statistics, competition, etc. to FIND OUT if people will love this?”

Assumption- “We can sell this on Facebook.”
Due Diligence- “Let’s STUDY our ideal demographic and their consumer habits. Let’s study what our competition is already doing to generate sales.”

Assumption- “We should charge like $500.00 for this.”
Due Diligence- “Let’s hire professional SURVEY companies to run price points by our target demographic, and see what our market is likely to pay for it.”


Assumptions- “We should start putting this together right now.”

Due Diligence- “We should create a BUSINESS PLAN that outlines vision statement, mission statement, value statement. It should reverse engineer long term goals into short term goals or tasks. We should compute pro-forma financial projections based on our current sphere of influence, and marketing effort projections. We should figure out budgeting. We should figure out all of the systems necessary to make sure our product is effectively marketed, our leads are properly taken in and followed up with, our promise to deliver can be met timely and consistently, our customers can receive adequate support, and our financial progress can be tracked and managed.”

If you don’t nurture your business, it will turn on you….

Raising up a business to be fully self-sufficient is like raising a child. I’ve known parents who put a lot of time and effort into practicing the best habits in raising their children. I also know parents who just wing it. On average, which kids do you think grow up to be high-functioning, fulfilled adult? And which ones do you think are more likely to show major behavioral issues, coping issues, and an overall lack functionality?

A business needs to be equipped in each area with the necessary tools to function on a high level. Just like being a good parent, being a good entrepreneur means that you raise your children to have a thorough understanding of the outside world, skillsets for everyday life, and a good head on their shoulders.

In business, you want the same things….
1.You have to build your plan for running a business off on EVIDENCE and not assumptions.
2.You should be isolating mindless repetitive tasks and creating PROCEDURES which can be delegated and automated.
3.You should be ensuring that your business meets its OBJECTIVES consistently in order to carry it all the way through to your long term vision.
Your business needs to be built off of reality, designed to function efficiently, and guided according to its vision and its values.

If that sounds like too much work for you, remember this. We start businesses to set ourselves FREE. A business that isn’t founded on reality will cost you precious start-up capital in wasted marketing and production. A poorly delegated business will eat up all of your time, and make your business far less competitive. A business that merely lingers and improvises rather than committing to its mission will lose its way and very often fall backwards.

You only have one life. Don’t waste it on poorly planned pursuits. If you waste all of your time, money, and patience on poorly designed ventures, it’s the same as trying to fly to the moon in a row boat.

About The Author


I am a college drop out who found my passion as an investor. I love the many facets of finance, investing, and business. But even more than that, I love sharing what I learn with others.

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