What is due diligence?

Due diligence is the investigation and research that an investor should conduct prior to making an investment to determine whether that investment is right for them. This is true for any kind of investment — from stocks to real estate to businesses.

It’s technically a legal obligation for some investments but I would argue that it’s essential for any investment and, in fact, for any kind of agreement or acquisition at all, whether it’s your home or car, or even whether you’re thinking about entering into a relationship with someone. (In a way, it’s all an investment — your car is an investment of money into your ability to get around; your new relationship is an investment of time and energy into a friendship or romance).

Ultimately, due diligence should answer the question: “Is this investment right for me at this moment?

Good due diligence should first seek to understand that investment (or whatever) as thoroughly as possible. Then, it should consider what the investment means to you and your own goals and timeline.

HOW TO UNDERSTAND THE INVESTMENT

To understand the investment, you need to explore it thoroughly. If it’s a stock, you need to study the stock itself, the industry, and market trends (and so much more. If it’s a real estate investment, you need to study the marketplace, the tenants and property management company, and the costs of maintaining a home in that area (and so much more). Even if it’s a potential romantic partner, you need to know what they’re hoping for a relationship, how they enjoy spending their time, whether the attraction is mutual, etc.

HOW TO CONSIDER WHAT THIS INVESTMENT MEANS TO YOU

An investment, by its very nature, requires you to trade something of value for the potential of a return. That thing of value could be money, time, effort, or many other things. So it’s important that you know what is required of you (and whether you have that to give) and what you can expect. And perhaps most importantly, you need to decide whether the expected return is what you want. Many investors buy into something without really thinking about whether it’s right for them at this moment in time; they end up putting up too much value and receiving returns that they are disappointed with.

DO YOUR DUE DILIGENCE — ALWAYS

Regardless of your investment, it is impossible to perform too much due diligence. However, there comes a point when, practically speaking, you’ve done enough due diligence to move forward. I don’t think people have a problem with the idea of due diligence; rather, I think people do too little due diligence.

(Side note: As a real estate investor, I hear a lot of people say that they’re doing their due diligence but what they’re really doing is being stalled by fear and they are allowing that fear to catch them up into a loop of “analysis paralysis”. Strangely, I only see this in real estate and business investments — never in the stock market.)

Do not leave your due diligence in someone else’s hands. Sure, your financial advisor might help you perform some of your due diligence but don’t think of them as a replacement for due diligence! Do it yourself. Be thorough. Don’t rush.

Check out some of my other writing on due diligence including:

Use this strategy if your customers are going offshore instead of buying from you

A new client came to me recently because they were seeing many prospective customers moving their business offshore. The price disparity between buying from a North American supplier (my client) versus buying from a foreign (offshore) supplier was dramatic.

Although there is a lot going on here (in terms of economics, pricing, domestic-versus-foreign suppliers, shareholder pressure among customers, etc.), I want to focus on one simple strategy that can be used to help address this problem of buying from an offshore provider.

In a lot of industries companies used to buy locally because that was really the only option. Then the internet eliminated many of the cross-border buying barriers and suddenly countries that have a cheap labor market can underbid many domestic providers on nearly everything.

You see it in manufacturing; you see it in services. I noticed it when I was starting up my freelance writing business: I was bidding at a much higher price against freelance writers in India.

If you own a business that is facing the challenge of prospective customers who are going offshore for cheaper products and services, how do you win back that business?

YOU GET BACK INTO THE CONVERSATION

I recommend that you get back into the conversation. Specifically, you find a way to position yourself within the sales funnel of those offshore providers as a “checkpoint” that your customers will have to or want to cross before buying.

In my situation as a freelance writer years ago, I was able to get onto the same job-bidding platform and I used a variety of tools (especially pricing strategies and added value) to become a preferred service provider even if I wasn’t the cheapest. But another really helpful strategy was my book The Sales Funnel Bible which helped to demonstrate the importance of great marketing and sales copy all the way through the sales funnel. Prospective clients would read the book and come to understand that those offshore service providers might be cheap but they were just “order takers” – doing whatever work was assigned to them – while I always took my customers’ sales funnel into consideration when thinking about the work I was doing for them.

For a manufacturing client, I recommended that they do something similar: They need to investigate the offshore outsourcing marketplace in their specific industry and write a report on it. The report needs to be THE go-to resource on strategies and best practices to effectively outsource (domestically or internationally) and the report should implicitly position my client as a superior option. (There are many ways to do this effectively and ethically).

This helps put my manufacturing client back into the conversation: They become educators and advocates within their industry of effective outsourcing and they get back into the conversation – ultimately giving themselves a chance to show how their higher-priced product is still superior.

If you run a business that faces stiff competition that seems to be stealing away all of your customers, how can you get back into the conversation?

What to do if a competitor is stealing your customers

Early in my career I managed a retail store in a small town. There were only two such stores in town – mine and the competitor’s, and we worked just down the street from each other. For the most part, we each had our own customers but once in a while there was cross-over. His customers would come to my store and mine would go to his. Sometimes I’d see long-time customers of mine at his store and it was dismaying, but I know the reverse is true as well.

Competition is good for business and it’s fun. But it can also be cut throat (even when you maintain a professional, legal approach to your competitiveness).

Although you don’t always know when a competitor is stealing your customers, sometimes you do. Here’s what to do if your competitors are stealing your customers.

NOTE: When I say “stealing” I don’t mean it in an illegal way. There are rules and laws that companies need to play by and I’m making the assumption that both you and your competitor are in fact remaining compliant. When I say “stealing” I mean that your customers are going to your competitors and those competitors are happily serving them.

So here’s what to do…

  • First, decide if the customers are worth the effort. Some customers are not worth the effort. I recall one customer who threatened to go to the competition and it was welcome news to my ears because he bought from me so irregularly and was such a ridiculous amount of work that letting him go freed me up to serve more of my better customers.
  • Build a relationship with your customers. Don’t just tell them that they’re important to you (which is what most businesses do), show your customers that they’re important to you by taking an interest in their lives. For professionals like real estate agents and financial advisors (and some other similar professions), I always recommend that you truly get to know your customers. Send them birthday cards and call them. Send them flowers on their anniversary. If they play on a sports league, go to their games and cheer them on. Don’t be a stalker but be a friend. Check out these 61 questions to strengthen your client relationships and build loyalty.
  • Remind your customers of the value you provide. This is a huge complaint I have with a lot of companies (although if I were honest with myself I’d have to admit that I’m probably just as guilty of this). Once your customers are sold on purchasing from you, most businesses stop selling. But you have to continually “resell” to your existing customers and remind them why they’re buying from you. Otherwise they make the mistake of assuming that your competitor is exactly like you… and as soon as your competitor offers something cheaper, then loyalty is at risk.
  • Wow your customers. Truly wow them by shocking them with how unbelievable your service is. (Hint: This is rarely done).
  • Be proactive. Don’t wait for your customers to come to you. Go to them and help them see that they need to buy more of whatever you’re selling.
  • Constantly ask your customers how you can help. You may find more ways to extend your own products or services but you might not… helping your customers might mean simply understanding what challenges they have in life and making introductions to others who can help them.

The worrisome truth is: Competitors are stealing your customers because you aren’t demonstrating the most important thing: That you are indispensable. Demonstrate that you’re indispensable and prove it over and over again and your competition will eat your dust.

Too many business say they WOW their customers… but few actually do

I hear a lot of businesses talk about giving “WOW” levels of service. But I just don’t see it all that often.

I think we’re at a point now where businesses say that they’re committed to WOW levels of service only because it’s expected that they say it – as if it “WOW Service” is the default text in every website template.

I’ve railed against the assertion of giving “great service” before and I think a similar thing is happening to the word “WOW”. Businesses are devaluing the term because they’re overusing it but falling short on what it really means to WOW customers.

What does “WOW” service really mean?

WOW service should mean that you are delivering a level of service that is so unexpected and shocking that customers exclaim “WOW!”

But what it’s come to mean is: businesses are delivering exactly the same level of service that they always do, which doesn’t really set them apart from the competition and definitely doesn’t WOW the customer.

Does your WOW service really WOW?

  • As the prospective customer moves through your sales funnel, do they express surprise at how much value you give away prior to the sale?
  • During the transaction, does the customer express surprise at how great of a deal they’re getting?
  • After the transaction, does the customer express surprise at how much you continue to serve them even after they’ve already paid?

You need to answer yes to at least one of these (and preferably all three) if you are going to truthfully claim to WOW your customers.

The very best business advice I’ve ever received

There’s a lot of business advice out there. What’s the best business advice you’ve ever received?

I can’t think of better advice than this: Solve a problem.

It seems almost too simple but I can’t think of a better way to start and grow a business than simply to solve a problem.

Every successful business solves a problem. Sure, the problems that each business solves may vary in its severity and impact on our lives but they still solve a problem. The local donut shop solves a very different problem than a life insurance company, and you could argue that the problem solved by a donut shop isn’t quite as severe or impactful as the problem solved by insurance.

This simple business advice has 3 specific applications, at least one of which will apply to you right now and can help grow your business dramatically:

3 IMMEDIATE ACTIONS

  1. Your business doesn’t solve a problem. If your business is struggling, there’s a chance that you don’t actually solve a problem. Perhaps you’ve started a business that is more of a passion project or hobby, and you might even have a couple of customers come in who share the same interest. But if you don’t have enough customers, you might not actually solve a problem. Can youarticulate what problem you solve? If you can’t, take a look at the customers who have come through the door and the reasons that they buy.
  2. You don’t know what problem you solve. Hopefully you do solve a problem. If your customer base is inconsistent and it fluctuates in terms of both income and profitability then there’s a good chance that you solve a problem but don’t really know what that problem is. Ask your customers why they buy from you.
  3. You don’t effectively communicate the problem or the solution. Often, marketing is focused on what you do rather than the problem and your solution. (This is the classic features-versus-benefits problem that exists in a lot of marketing). It’s common but, fortunately, it’s also the easiest to solve of the three I’ve listed here. Your marketing needs to hammer home the problem and establish its severity to your audience, and then your marketing needs to build a case for why your solution provides the best value to them. (And if you’re already doing this then it’s just a matter of doing more of it and doing itbetter.

If you want to grow your business (and what business owner doesn’t???) then one of these 3 actions will apply to you.