Permanent Equity: Investing in Companies that Care What Happens Next

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Why We’re Sharing Our Diligence Process

When I put my first SMB deal under LOI, my attorney said we needed to "do diligence" which I pretended to understand.

I literally typed into Google, "Do Diligence," read for 30 seconds, and then responded..."So we just ask questions? I can do that."

Brent Beshore, on “doing diligence” for the firm’s first deal in 2009


We’re open-sourcing Permanent Equity’s diligence process. In this guide, we’re telling you how to start, what to do, how to answer, what to ask, and how to structure the team to see it through.

The open-source concept comes from software development, where engineers could access code written by others in order to debug, optimize, and improve it. By doing so, the software gets better faster and exponentially increases in utility – and therefore value – to the world. That exponential increase in value is why sharing something also makes sense economically. 

So, we’re putting our process and best advice out into the wild to make it better (to get to better relationships faster and surface more and better information sooner), but we’re also doing it to help buyers and sellers enter into (and emerge from!) the diligence process equipped to do the work, build a deal, and get to close – so we can all focus on what comes next.

In smaller companies, one of the biggest challenges is knowing what “great” looks. That’s as true for due diligence as it is for marketing or financial processes. When you’re encountering something for the first time, it’s virtually impossible to recognize what’s normal or abnormal, good or not so good. 

And most businesses only go through due diligence one or two times. So for virtually everyone involved on the seller’s side, everything about the process is new. Yet we could not find a credible, readily available barometer on what to expect, let alone on what’s reasonable. As a potential buyer, that seems like a problem.

Successful partnerships, especially in the long term, require that both sides understand the process and terms, and eagerly enter into agreement. 

Thus, this project: Do Diligence Confidently. 

In sharing our diligence process, we want to empower sellers and executives to confidently navigate the diligence stage of deal-making, which is ultimately your engagement to a buyer. One of our foundations at Permanent Equity is to focus on being helpful, not impressive. And so, “Is it helpful?” is the litmus test for each tool. 

This content was not developed to manipulate valuation, to facilitate faster exits, or to present a suspiciously clean record to a buyer. These tools were developed to help real deals, those based in reality, successfully close. We’ve never seen a perfect company and frankly don’t believe in them. Perfection is not the goal. The goal is that all parties can work from the same foundation on why you’re doing the work, what happens as part of the work, how to get organized, and when to ask for help. 

With that foundation, you can navigate due diligence confidently. 

One note before you dive in: This isn’t meant to be a comprehensive guide to diligence for any set of parties. Instead, it’s a window into how we diligence at Permanent Equity. When you dig into these tools and resources, you’ll notice that it’s both time- and labor-intensive. It’s work! While diligence is, in fact, asking (and answering!) questions, it’s also building trust, understanding what winning looks like, and putting together deals that benefit the buyer, the seller, and the business collectively. 

And if you want to go the extra mile, we also ask that you share this project with at least one person who may be involved in a due diligence process in the future. We’ll be grateful, and eventually they might be too. 

– The Permanent Equity Team


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