3. Do Your Due Diligence, IUH 2009-12, 2ND Ed, R513A

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DUE DILIGENCE
Dr. Don, Founder ICFO

3. Do Your Due Diligence, IUH 2009-12, 2ND Ed, R513A

Due Diligence in the offline world of business is done before you buy into or take over a business. The same goes for large land and real estate purchases, also accompanied by a real estate appraisal. You want to know the owners, what is the value of the company and its assets. If a store, shopping center, hotel and such, what kind of traffic is in the area, occupancy, demographics, etc.? How much and what kind of inventory do they have? The same goes for doing a Joint Venture or buying into a Franchise. If you are buying a big-ticket item such as a car, you will usually shop around. Perhaps you will check some form of Consumer Guide.

The process is often long and drawn out. Offline it is or should be done by an independent third party. The due diligence process nearly eliminates emotional spending. Why should doing business online be any different even though the transaction can be accomplished quickly, for with less MONEY. However, online leaves the due diligence process you, no one is looking over your shoulder; well perhaps, except for the spouse or partner.

We show how to do your own Online Due Diligence with a selected range and number of DD Tools for you to do your own research. Like everything else online, tools and techniques change. As you see such changes share it with us in our groups. We also post updates in our blogs which are later incorporated in a revision to this handbook.

WHAT IS DUE DILIGENCE?

Due diligence is a term used for a number of concepts involving either an investigation of a business or person prior to signing a contract, or an act with a certain standard of care. It can be a legal obligation, but the term will more commonly apply to voluntary investigations. A common example of due diligence in various industries is the process through which a potential acquirer evaluates a target company or its assets for acquisition.

The care that a reasonable person exercises to avoid harm to other persons or their property

An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to a sale.

Generally, due diligence refers to the care a reasonable person should take before entering into an agreement or a transaction with another party.

INVESTOPEDIA EXPLAINS ‘DUE DILIGENCE (DD)

Offers to purchase an asset are usually dependent on the results of due diligence analysis. This includes reviewing all financial records plus anything else deemed material to the sale. Sellers could also perform a due diligence analysis on the buyer. Items that may be considered are the buyer’s ability to purchase, as well as other items that would affect the purchased entity or the seller after the sale has been completed. Due diligence is a way of preventing unnecessary harm to either party involved in a transaction. Investopedia

Research and Analysis of a Company or Organization done in preparation for a business transaction (as a corporate merger or purchase of securities) M-W Dictionary

DUE DILIGENCE CAN BE DEFINED AS:

  • The examination of a potential target for merger, acquisition, privatization or similar corporate finance transaction normally by a buyer.
  • A reasonable investigation focusing on material future matters.
  • An examination being achieved by asking certain key questions, including, do we buy, how do we structure the acquisition and how much do we pay?
  • An examination aiming to make an acquisition decision via the principles of valuation and shareholder value analysis.

THE DUE DILIGENCE PROCESS CAN BE DIVIDED INTO NINE DISTINCT AREAS:

  • Compatibility Audit Financial Audit
  • Macro-Environment Audit Legal/Environmental Audit Marketing Audit Production Audit Management Audit Information Systems Audit
  • Reconciliation audit.       Wikipedia

BUT I AM READY TO ACT NOW

Sometimes DD is a just a troublesome mental thingy, because I am ready to act now!

Offline:

Buyers I want to make this large purchase and don’t want to wait; but my banker, accountant, lawyer or someone requires that I have a Due Diligence done by a third party unrelated to the transaction. Costs are usually borne by the Buyer. Can be and usually is a long-drawn out process.

In my experience, it is surprising how many big money players also react on emotion, save time, save the cost of doing their Due Diligence, only in the end to lose it all. Big enough money to pay cash so no DD requirement was imposed by another, i.e. lawyer, banker, etc.

Example, if the seller creates a sense of urgency or perhaps demand, then Buyers are more likely to react more with emotion than reasonableness. A wealthy Malaysian Chinese Buyer wanted to do business with a Vietnamese Seller. The Agreement was drawn up in only 1 language, that of the seller, the buyer didn’t have it translated into his own language, therefore didn’t understand the fine print. The fine print contained a clause that the caused the buyer to default and forfeit millions in his down payment. Greed, stupidity, a scam, perhaps!

Online:

I want to join this program. I have no idea whether it is a scam, but it sounds great, but my online adviser (Dr Don) says slow down, and do your own Due Diligence. Fast process, can be done in less than a few minutes to an hour. Cost is zero. Why Not! Better Safe than Sorry

Due Diligence can vary with the business type and the purpose. Some for legal, tax, financial, IT, operations, management and the list grows. In simplest terms for us; it means doing our homework.

Our objective is to avoid a fraud or scam, and to join a successful program. If it is a new site, then a Google search will provide us with no help. A Whois search may help us find who the owners to enable us to do further research. We need to know who the owners are, how long they have been in business, what is their track-record, are there any legal actions against them. Are customers or affiliates complaining, and have they ever been accused of a Scam or a Fraud?

Right away, you can see that this process will slow you down. And sadly, most of you will not bother. While it is much faster than doing an offline due diligence process, it is our objective to slow you done enough to help control your emotional spending. Remember, many of your friends will also offer you something that they, themselves have not investigated; we will support them by joining, then we all lose.

12 SIMPLE DUE DILIGENCE MLM INVESTIGATIONS

SIMPLEST MLM INVESTIGATION

Get into the “BRAIN & PUSHBUTTON” MLM Detective mindset! Look at the supposed MLM Company’s website. First suspect clue would be no street or city address, worse yet, only an email address, no phone number. Then look for the pictures and names of the owners of the company. Not having these on a website is a quick absolute reason NOT to join. Some wise, seasoned MLM distributors doing their Due Diligence Investigation will use “http://earth.google.com/” to (free 7 day trial or $20) look at a satellite picture of the size and location of a supposed MLM Company office. Address = trailer house or home? That is a 911= Run!

RUN – TAKING ONLY BANK WIRES, MONEY ORDERS OR CHECKS

Use your MLM Detective Investigative “BRAIN.” Only use a credit card that will accept charge backs and returns? Honest companies allow refunds within 60-90 days (8 states require a year)! Money by FedEx – UPS only? Yikes! Scam Time! A trained MLM Detective will tell you the scam artists do this to avoid Postal Fraud charges! A PUB (private mailbox) address is an indicator of dodging Postal Fraud Investigators = 911 run a SCAM!

EASY MLM INVESTIGATION TRICKS

  • Next MLM Detectives will go to the Internet and enter the following into one or two of the major search engines:
  • The MLM Company’s name (owners too) and the word “scam”. Go through two pages! Look for forum message comments for legitimate complaints (see below).
  • Then do the same for “complaints, lawsuits, and news articles archived on search engines. Also check who registered the website domain of any new company claiming: amazing, incredible, proprietary, never seen before in the universe, revolutionary, products, services or technologies!
  • Check http://www.whois.net/ for the domain lookup. Companies with good offerings would register a name 6 months to a year ahead of time.
  • A warning on MLM due diligence for MLM Researchers! There are sad sites and forums that are unfairly negative toward all MLM – Network Marketing companies. Ignore these “Anti MLM Zealots” and only look for appropriate information. A good MLM Detective will ignore 99% of their BS!

A SECRET DUE DILIGENCE TOOL

Alexa can give you Internet Web Ranking Due Diligence that on 1 out of 10,000 knows about. Grab scammers by the throat when they come to pester you!

http://www.mlmwatchdog.com/mlm_due_dilligence_secret_alexa.html

DON’T SPEND OVER $500 TO START

There are over 22 states that require registration if an opportunity (not just MLM but includes MLM) requires you to spend over $500. Two states say it must be kept under $200. If a company says join for free and spent $501 for product – They had better be registered!

A good MLM Detective will run if there is no way to join for under $500 See the new FTC warning (below) this MLM Detective due diligence article and my notes on the $500! SCAM example –Thinking it was MLM Here is a list by the FTC of States requiring “Biz Opp” registrations. Remember this if a recruiter is hustling you for over $500 and no registrations.

Why  join?  They  may  get  shutdown                   for  not  having the state Business Opportunity registrations! Why risk joining? You can lose time and money! There goes your opportunity! http://www.ftc.gov/bcp/franchise/netbusop.shtm

LOT OF NUTRITIONAL PRODUCT HYPE

  • Raise the dead? Live 130 years? Cure Cancer (which is an illegal claim for any nutritional)! If it is not a nutritional, skip down to next due diligence for MLM Detectives.
  • Get a list of the MOST critical ingredients in the MLM’s nutritional product and put them beside your computer.
  • Go to the U.S. Government National Institutes of Health nutritional research website PUB MED. Go to Pub Med after you read the next two sentences! http://www.ncbi.nlm.nih.gov/sites/entrez
  • Look up the major ingredient(s) by entering its name in the search box.
  • Read through the scientific studies. Some may be complex, but the END sentence usually gives you a good idea if the study was a Plus or Minus for the product. Read over at least 10 articles use a piece of paper to keep track of studies like this Study #1 Good Study #2 good #3 What did they say? (Or just what?) Study #4 Good Study #5 Bad. Make your own judgment!

NEXT MLM DETECTIVE DUE DILIGENCE RESEARCH

  • MLM Detective “PUSHBUTTON” Go to the Better Business Bureau website for the city where the MLM-Network Marketing Company is located. Most are free.
  • You are looking for the number of complaints the BBB has NOT resolved. If there are over 24, hold off joining, it very well could mean problems.
  • MLM Detectives don’t overly trust BBB reports but we the can be good indicators. Here is the National BBB Advanced Search don’t use the quick search.  http://search.bbb.org/SearchForm.aspx?mode=Business

WATCH OUT FOR HOT

  • An email solicits you to a “HOT” MLM, Party Plan or Network Marketing Company!
  • Look for exclamation marks and capital letters used to lend legitimacy or urgency!
  • Beware of disclaimers such as “this is not a pyramid selling scheme or scam” (legitimate offers don’t contain such claims).
  • Don’t believe promises of fast wealth.
  • If you feel, see or hear “Get Rich Quick!” Run! If it sounds too good to be true, it usually is!
  • MLM Network Marketing takes some work, like any good Home Based Business.
  • MLM, PARTY PLANS & NETWORK MARKETING COMMON SENSE
  • Don’t let the money over-excite you! Use the products or services being sold first! If they excite you, then look at the money. You should try sharing and selling the products/services to test them out. Spending some money to test a company and their offerings is a wise thing to do.

FOLLOWING RESEARCH FOR DEDICATED MLM DETECTIVES

Check with the Attorney General in the state where the company is located. Be very brief with your email or phone call and stick with asking, “MLM Company XXX is located in city in your state, do you have complaints against Company XXX?” A complete list of Attorney Generals is in MLM WatchDog                                                      COMPLAINTS Library.

READ THE FINE PRINT IN THE MLM CONTRACT

MLM Detective “BRAIN.” These are the Enrollment Agreement or Terms of Agreement plus Policies and Procedures. These all together are a business contracts, enforceable in a court of law. The Distributor Rights Association says they shouldn’t be over 15 pages long. Don’t sign if you don’t feel comfortable about the contract.

COPY THE PAY PLAN AND ASK QUESTIONS

Then find an expert to analyze it. If it only pays for signing up new people and not sales of products/services – run! There’s a copy of my MLM Compensation Pay Plans Book on Amazon. Search for my name by author – Rod Cook. No, this is not a shameless promotion for my book. My book is the only one with big pictures, diagrams and detailed to help both the new person and expert. MLM Watchdog ethics let me say it’s a good book! Plus my book has a whole chapter on avoiding Pyramid Schemes. MLM Detective

HOW TO CONDUCT ONLINE DUE DILIGENCE – BRUNO [removed]

Thanks for Reading – 3. Do Your Due Diligence, IUH 2009-12, 2ND Ed, R513A

Dr Don, Founder, ICFO

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