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Guest post by: Dr Don Yates Sr PhD Become an Author

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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.

http://www.leadsleap.com/go/40264 Our ISA Groups Blog

http://www.leadsleap.com/go/40265 Avoiding Scams Online Blog

"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.

Due diligence can be defined as:

1. The examination of a potential target for merger, acquisition, privatization or similar corporate finance transaction normally by a buyer.
2. A reasonable investigation focusing on material future matters.
3. 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?
4. An examination aiming to make an acquisition decision via the principles of valuation and shareholder value analysis.

The due diligence process (framework) can be divided into nine distinct areas:

1. Compatibility audit,
2. Financial audit.
3. Macro-environment audit.
4. Legal/environmental audit.
5. Marketing audit.
6. Production audit.
7. Management audit.
8. Information systems audit.
9. Reconciliation audit. Wikipedia

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

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

1. 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 thatmay 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.

2. Due diligence is a way of preventing unnecessary harm to either party involved in a transaction. Investopedia

1. the care that a reasonable person exercises to avoid harm to other persons or their property
2. 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

A common problem, 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 our friends will also offer you something that they, themselves have not investigated; we will support them by joining, then we all lose.

As for me, I admit that if I had approached doing business online as a serious business and not as a hobby or a sideline business, then I probably would not have being writing this Handbook for you.

Is it a MLM or a Networking company? Follow the 12 steps.

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!

Use your MLM Detective Investigative "BRAIN." Only use a credit card that will accept charge backs. 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!

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 forforum message comments for legitimate complaints (see D 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 B S.!

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

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 thestate Business Opportunityregistrations! Why risk joining? You can lose time and money! There goes your opportunity!

http://www.ftc.gov/bcp/franchise/netbusop.shtm

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.
• D. 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 GoodStudy #5 Bad. Make your own judgment!

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 2-4, hold off joining, it very well could mean problems. MLM Detectives don't overly trust BBB reports but we the can be goodindicators. Here is the National BBB Advanced Search -don’t use the quick search. http://search.bbb.org/SearchForm.aspx?mode=Business

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.

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.

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 inMLM WatchDog COMPLAINTS Library.

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.

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

Do you enter into business relationships, acquisitions, property investments, partnerships, or enter into a transaction without first verifying a company’s identity, associates and affiliations?

Most people do and you not alone. However most entrepreneurs still enter into business relationships with curiosity and unanswered questions they may have regarding a company or associate of a particular company. Wouldn’t it be beneficial to you and or your company to limit liability and risk by conducting due diligence before entering into business relationships?

By limiting your risk and liability, your business will have a far greater chance to succeed. By conducting simple due diligence and developing your own profile on any person or business, you will have a much better understanding of a particular business and its associates.

This is vital to your business decisions. 90% of the information you need to know can be found on-line. You just have to know where to look for it, and how to look for it. I will show you how you can develop your own profile on anyone or any business on-line free

Example on a property investment acquisition: I contacted an individual who had placed a classified ad through an on-line newspaper under real estate finance/services for hard money lending, private moneylenders. I was really just trying to get a feel for the market in that specific area of the country. I do this by contacting various types of real estate professionals such Agents, brokers, title companies/escrow, private/hard moneylenders, bird dogs, wholesalers, etc. When I call, I get their personal name and the company name they work for (if any). If it’s a company it’s usually an LLC which is very common in the real estate industry or another type of corporate entity.

Many times, people talk fast or not very clear on the phone. Therefore, I always have them spell out their name and company name and have them provide me any additional contact numbers that they can provide should I need to speak with them at another time.

When the subject I am speaking to on the phone tells me the name of the company he or she represents and it is a corporate entity such as an LLC, S-Corp, partnership, etc. I know right away I can get the corporate members names within a few minutes. I will first go to the states web site in which the individual claims to conduct business in and lookup the entity online by the name of the company.

Just about all the states in the US have free online searches at their web sites where you can lookup information about a corporation by company name or agent names. Just go to your favorite search engine like Google or MSN and type in the name of the state and corporations. Example “Arizona Corporations”, “Texas Corporations”, “Nevada Corporations”. The search engines will typically return the results you’re looking for within the first two organic search result listings. Once you get to the states web site you will need to find where on the web site you can look up a Corporation. Usually it will just read “Look up Corporations”.

Type in the name of the company and you can find out all corporate members, addresses, resident agents, corporate status- good standing- dissolved, revoked, etc. What I typically do is find out if the name the subject provided to me on the phone is indeed an actual member of the corporation, and then I run his or her name through the states database and see if he or she is involved in any other types of corporations. I find that is quite common to have members involved in several corporations.

Sometimes you will not find a company’s name in the specific states database. There could be a few reasons for this. The company may be a sole proprietor, or the company is registered in another state but has not filed as a foreign entity in the state they are doing business in.

Sometimes companies operate this way. In this case it would be wise to search the Nevada and Delaware corporation web sites to determine if the company or agents are registered in either of those two states.

There are a great number of corporations that register in Nevada and Delaware simply because of the asset protection. It is difficult to pierce the corporate veil under the laws of those two states and that alone drives many, many companies to register in those particular states.

I then run the companies name and agents name through online courthouse records in the specific county where they are residing in or conducting business in.

Again like with the states, most counties have some type of information that is accessible online. Civil, family law and criminal filings are what you would most be interested in. You can go to the National Association of Counties by going to- http://www.naco.org and look up the county of your interest and you will go to their web site and see what kind of records that are accessible on-line for you to search.

If you don’t know the name of the county, you can locate a County by just knowing the City and State by going to the US Census Bureau and searching their database located here: http://quickfacts.census.gov/cgi-bin/qfd/lookup?state=01000. Or you can locate a County by Zip Code by searching this database by just entering a zip code http://www.usatrace.com/Search.html As soon as you locate the counties web site that you want to search just run the subjects name and company name through the various online databases. It can be very interesting to what you might find through courthouse records.

You should also run the subjects name, company name, and phone number, any addresses separately through Google- Using each category- Main Google, Google Groups, and Google News. I typically run the above search criteria through Google to see what I can find and where it links.

You can also verify if any address is a mail drop (like Mail boxes Etc.) or if it is actually a street location by using a free database search located here:

http://www.finaid.com/scholarships/maildropsearch.phtml

The individual that I recently contacted in regards to private money lending had provided me his name and company name when I asked, which is typical with any dealings on the phone. I already had his contact number from the ad that he had placed on-line in the classifieds under “real estate finance/services”.

I first ran the phone number to see if it was a cell number or a landline number. I do that by going to http://fonefinder.net I then ran his telephone number through Google to see if it appears online anywhere. I enter phone numbers in Google like this: - area code-prefix-phone number. Example- “111-555-1212”. Running this search gives me a good idea if the phone number he provided me has been used anywhere online.

Sometimes I find a different name of the company other than what they provided, or I may find a web site where the phone number was used as a contact number, I may even find a personal add placed where the subject was trying to sell a classic car and the contact number matched that of which I already had. Or I can find out which forums the subject hangs out at, he may have used the phone number there. If I find a website where the contact number I entered into Google shows up, I find out who owns the web site by searching the Whois directory located here- http://www.betterwhois.com I may find another name or indeed find out my subject owns this particular web site.

I start developing my profile of the business and the subject themselves by initially starting with a simple phone number. I can find all kinds of interesting things by simply running a search through Google with the subjects contact telephone number.

I then ran the company name that the subject had provided me by going online at the specific states website where I can look up and find out information about corporations. This will allow me to verify or reveal agents names. Sure enough he was a member of the corporation. However, the last name he provided to me was spelled and pronounced much differently than what was revealed with the corporation search. It was way off.

I then went to the respective county web site to search online for civil and criminal records on the subject. I knew which county to search based on the subjects phone number and the zip code that was returned for the subjects address revealed in the corporation search through the states website.

I found numerous civil filings on the subject regarding business dealings including an Exparte filed for a wiretap on the subjects phone number as well as family law cases involving domestic violence. I also found a criminal case-. Possession of marijuana

Now it does not take a rocket scientist to make up one’s mind if they would like to enter into a business relationship with this subject. There is a greater possibility that I might have issues with this individual and things may not work out so well in the future.

There are many scenarios of why you would need to conduct due diligence on an individual or company. However, remember you should always verify or reveal information on an individual or company prior to entering into a business relationship. Frank Bruno

Google Search - or your favorite search engine A Google search is probably the best place to start. Look for the site reviews ”Red Flags for Scams”. Keep in mind, that anyone can make a post reporting a site as an online scam or spam, just as anyone can post a review or testimonial favoring the site – including the owners and friends of the scam. Try to dig deeper.

Always start any due diligence with a Google Search. The results of that search may reveal enough negative comment to forget doing business. If it is a new site, it probably won’t have a history, so then you go to the Whois tools

Lists The ever popular Lists - See Appendix e. for recommended sites that maintain lists of Banned, Scam and Watch Sites

WhoIs BetterWhoIs Visit the registrar of record:

Search for variations of (Site name) that are still available

See who links to the Site

See how much traffic the site receives

See what the site looked like in the past

Search the Internet for references to the site

Receive a domain appraisal for the site

Free report: Have you protected your domain from cybersquatters?

Free report: How to protect against domain hijackers and porn pirates.

Free report: The benefits of domain consolidation.

Alexa Traffic Rank (Alexa Ranking) Reputation (number sites) sites linking in

Alexa includes a Rating Feature where you can rate your favorite sites and help improve their ranking

Learn more about Alexa Traffic Stats. View the complete Search Analytics

Our Popular Tools:

IP Tracer

Whois IP and Domain Whois

Reverse IP lookup

You should hide your IP address

Trace Email Senders

Big IP address satellite image (Google Maps)

Enhanced System and my IP information (Popular)

Test your Internet Speed

Calculate Distance between IP addresses

YourWebsiteValue

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