Due Diligence…How Do You Find Out Who It Is You Are Really Doing A Deal With?
Wednesday, February 20, 2019
Economic development for development’s sake is not a wise strategy, especially when it comes to new business attraction. This would be like marrying for marrying shake, regardless of the person – something few people would ever do because marriages, like business deals, can last forever.
In the economic development world, recruiting new business to a community is like courting a future spouse. If a business moves to the area, they will be a forever partner and leave an indelible mark on the community. So, before you close the deal, it is important to conduct due diligence and be sure that this is a company you really want to live your life with.
How do you find out who it is that you are really doing a deal with?
First, sit down with a prospect and get to know them. You wouldn’t start a first date by proposing marriage. Likewise, on a first meeting, don’t put your offer or incentive package on the table. Instead, take the time to learn about the company, their ownership and what their goals are. In addition to asking questions about their business and requirements, try asking:
What drives you to succeed?
- What are your priorities?
- What goals do you have for the future?
- What role do you want to play in the community?
Their answers will provide important insight into their company culture, helping you to determine if their culture is a fit for your community. Remember, this is a relationship and courtships go both ways. As an economic developer, you need to provide the company with certain benefits to make the move worthwhile. Simultaneously, you don’t want to propose to just anyone. To receive the best incentive package and community support, a company needs to be a cultural fit, in addition to a financial one. After all, incentives can last for decades and once a company has moved to town, they may just stay forever.
Due diligence steps that every economic developer should take
Economic developers need to conduct due diligence on their own, outside of meetings. This is the only way to truly learn about a company, their ownership, history and the type of community partner they are likely to be after. Here are some of the due diligence steps every economic developer can take:
#1 Run reports
A Dunn & Bradstreet report will provide information on a business and their financial history. If offering loans or financial incentives, run a business credit report and also ask for financials.
#2 Check the Better Business Bureau
Locate a company’s profile on the Better Business Bureau website to view their rating and read any relevant complaints.
#3 Find them on Yelp
If a company provides a service or is in the retail industry, they are likely to have a profile on Yelp. Read what their customers have to say.
#4 Google them
Run a simple Google search to find the company in the news, read their press releases, see job postings, etc. If you have concerns, add the word “complaints” to the search.
#5 Speak with members of their community
If a company is considering opening a new location in your town, speak with members of their current community to determine the type of community partner they have been. Keep in mind that this may not be an option if they want the move to remain confidential.
#6 Check OSHA
To find out how a company treats its employees, it is wise to check with OSHA to see if they have been written up for safety violations. Read through their public records to determine if violations are serious and warrant concern.
Some deals don’t work out
When conducting due diligence, it’s better to realize that a company is not the right fit, than to provide them with a large incentives package and have something go wrong later. Knowing that business deals can forever change the culture and makeup of a community, it is worthwhile to take the time to conduct due diligence, ask follow up questions and be certain that this is a forever company. Otherwise, you may end up with a vacant building in the divorce.
There are benefits to being selective
Conducting due diligence and being selective about the companies you recruit is the best long-term strategy. As with marriage, when the match is right, it lasts forever and both parties are better for it. The right company will not only provide jobs - they will enhance a community’s quality of life, generate small business growth and help to strengthen the community. These are the businesses you want to invest in. These are the deals you want to close.