Are you wondering what it is?
Due diligence it’s just a process. Process of the investigation if the thing that you want to buy is worth their money.
It would be best if you did due diligence before buying the product.
For this, learn startup listing carefully, and schedule a call with the founder.
To do due diligence the right way, you need to ask the right questions.
Here is my list of 10 questions you should ask:
1) How many clients do you have right now? What is the main source of your clients?
Comment: By asking this question, you will understand if a startup has growth potential.
Customers, it’s the approval that the business should exist.
Even free customers are important because later, you could potentially convert them into paying ones.
2) What are your churn rate, MRR, LTV, and CAC?
Comment: They are the main metrics for every SaaS business.
Churn rate — the number of customers you have lost over a certain period of time (month, year), as a percentage of the total number of customers.
MRR stands for monthly recurring revenue. It allows you to predict how much income you will receive in the future, each month.
LTV is lifetime value. The average amount of money your customers pay for the time they interact with your app.
CAC — customer acquisition cost. It shows how much it costs to acquire new customers.
I could do a separate and detailed issue on it if you say.
3) Who wrote the code and who owns it? Any issues with it?
Comment: It’s important because after buying, you should maintain the codebase.
You need to understand if you could do it by yourself if it’s a no-code tool.
Or you should hire a developer. As a result, additional expenses.
4) Do you have customer support service? How do you handle feedback from clients?
Comment: It says that you keep in touch with your customers.
Remember, customers are your heart and brain. Without them, you can’t exist.
Therefore you should have strong customer support and respond to customers fast.
5) Can I try the product itself?
Comment: Trying the product itself will give you more understanding of the problem this product solves and how it solves it.
Moreover, you can ask additional questions on the call with the founder if you find something interesting using the product.
6) Do you grow organically or via ads?
Comment: You will learn the growth strategy set by the founder.
What techniques you can apply.
How hard it would be to grow the product in the future.
7) Do you have some automation in?
Comment: Automation is always good because it will save you tons of time.
But don’t be fanatic about automating everything.
Instead, always measure if it is worth it.
8) Do you have any analytics? How do you track your stats?
Comment: Analytics is essential here.
You can always approve to your buyers your numbers.
Setting it properly will give you insights into what distribution channel performs best.
So you can increase your efforts only on things that work and remove activities that don’t give you results back.
9) What are your expenses? What is the current cost to host the project? Any other monthly payments related to the project?
Comment: Expenses in tech are always low if we talk about hosting, domain, third-party services, etc.
But, there might be salary expenses or something unexpected, which could be high in price.
So always check this.
10) Who are your customers? Which business are they in? What’s the typical usage scenario?
Comment: Understanding who your customers are is key to the success of every startup.
If you know your customers well, you can easily scale your startup.
As a result, you found a product-market fit.
So you can increase your revenue shortly.