What would technical due diligence reveal about your business?
Whether preparing to sell your business, looking for investment, considering an acquisition or simply trying to reach the next stage of growth, the questions you need to answer are surprisingly similar.
What makes the business work? Can it keep working as it grows? And how much of that depends on one person knowing where everything is?
These questions sit at the heart of technical due diligence. In a transaction, a buyer or investor wants to understand the systems, data, people and processes behind the business. They will be looking for opportunities, but also for problems they might inherit.
If you’re selling, it is much easier to answer those questions when you have asked them yourself first. If you’re buying, they’re essential to making a good acquisition. Going for growth, they’ll help you build the right foundations to support it.
How mature is the business behind the business?
“Maturity” can sound like a judgement on how sophisticated the technology is. I think it is more useful to ask how reliably the business operates.
A simple way to think about it is in four stages:
Informal: Things work because knowledgeable people know what to do.
Repeatable: Important tasks have a recognised way of being done, although much still depends on individuals.
Managed: Responsibilities are clear, processes are documented, and the business checks that they work.
Scalable: The business can take on more customers, staff or complexity without having to reinvent how it operates.
Most businesses will sit at different stages in different areas. Finance data may be well managed while client information is scattered across shared drives. Technology may be reliable while only one person knows how a critical integration works.
That is normal. The value of the model is in showing where growth or integration could expose a weakness.
What adds value?
Start with the things that help the business do more.
A clear strategy shows how technology and data support the company’s plans. If the intention is to enter a new market or double the customer base, can the current systems support that? What needs to change, and what will it cost?
Good data is another asset. Is it clear where customer, product and financial information lives? Is it reliable enough to support decisions? Is it possible to produce a consistent view of performance without several people spending days reconciling spreadsheets?
Well-designed processes add value too. If a service is delivered consistently, the business can train new staff and serve more customers without relying entirely on the people who built it. Clear documentation, sensible automation and a team that understands the systems all make growth more achievable.
A buyer or investor can see the difference between a business with the potential to scale and one that will need extensive work before it can do so. If you’re growing, you should be asking the same questions.
What reduces risk?
Some of the most valuable preparation is less visible day to day.
Robust policies and procedures show how the business protects information, manages access, handles incidents and keeps essential services running. The point is to be able to show that people follow them. A beautifully written policy is of little help if the real process lives in somebody’s head.
The same applies to staff knowledge. Experienced people are a strength; depending on one person to keep a critical system running is a risk. Ask what would happen if that person left, was unavailable or simply wanted to take a holiday. Could someone else understand the system, access what they need and make a safe decision?
Suppliers need attention as well. What do they provide? Who owns the contracts? Could prices rise sharply as you grow? What happens if a key supplier fails or a contract ends?
These questions are useful whether or not a transaction is on the horizon. They tell you how resilient the business really is.
The complications hidden in the technology
Technical due diligence can uncover issues that are easy to miss when everything appears to be working.
A business may have several systems that hold different versions of the same customer record. An important process may rely on a spreadsheet and a manual transfer between systems. Software built years ago may be difficult to maintain, or an integration may depend on a supplier who no longer supports it.
“An unexplained problem is harder to price, plan for or trust than one the business has identified and is actively managing.”
There may also be questions about who owns software, code, data or other intellectual property, and what rights the business has to use or transfer them. Personal data needs particular care in an acquisition: the Information Commissioner’s Office advises organisations to consider data sharing as part of their due diligence when a merger or acquisition involves a transfer to another controller.
None of these findings automatically makes a business a poor investment, or poorly set up for growth. But in a transaction, an unexplained problem is harder to price, plan for or trust than one the business has identified and is actively managing.
Get ready before somebody asks
You do not need a perfect technology estate or a thick folder of policies. You need an honest picture of what the business has, what matters and what it intends to do next.
I would start with a practical review:
Map the systems and data the business depends on.
Identify the people and suppliers who keep them running.
Check whether key processes, responsibilities and access are documented.
Test what would happen if a system failed or a key person became unavailable.
Look for systems that will struggle with the next stage of growth.
Agree which issues need fixing now and which can be managed through a clear plan.
Keep the evidence as you go: decisions, system diagrams, contracts, policies, test results and plans. For business leaders asking the questions of themselves, that makes future due diligence less disruptive and gives the leadership team a better basis for decisions today.
Preparing for investment, sale or growth is an opportunity to understand the business you have built. The strongest position, whatever your perspective, is to know where a business can grow, know what could hold it back, and be able to show what is being done about both.