Due Diligence Means Asking the Tough Questions

By Tracy McIntyre


Taking time for Due Diligence!

Spring has finally found its way to Western Montana. With the grass turning green, calves and foals frolicking in pastures, and small towns a buzzed with activity after a long winter, Spring is a great time to invest in the future of Western Montana. It is also the time when due diligence is most needed. From business ventures to capital campaigns for community facilities to donating to a local charity, it is essential that individuals take the time to plan for their future, plan for their business, and determine the best use of their charitable donations.

In many small Montana towns, a handshake is all we need for a deal to go through. Because of our small town community spirit we are also the target for individuals who may take advantage of that hospitality. It is important for people to ask hard questions before they invest in a business venture or donate to a charitable activity.

I strongly encourage asking what your funds will be used for. Here is a little heads up… if someone is unwilling to discuss how funds raised will be used it might be a red flag on that organization or business venture. Fund raisers should have a plan in place before heading out and asking for investors/benefactors. It is perfectly legitimate for you to make sure that what you are giving to or investing in will have a positive result for you and your community.


Volunteering and/or Serving on a Committee:
As a volunteer on a committee or organization, it is your duty to make sure that you are representing your entity and project in a positive manner. You can ask others who have joined to give you background information on themselves. You can even ask for a resume and check references if there is any doubt of the volunteer's ability or sincerity… ask questions, check references and make sure that the person is who s/he says they are. This is especially important if you have people volunteering to be the forefront of your organization's fundraising efforts.
A common mistake for organizations is the belief that any and all volunteers are good. Though I fully encourage volunteerism, the worst thing for your organization is having a volunteer falsely represent you or represent your entity in a manner that harms your organization. As leaders you need to have the ability to not accept and even "fire" volunteers who are harmful. You don’t want to ruin your organizations efforts and reputation just because one person misrepresents themselves.

TIPS for organizations:

Build in 5 minutes at the beginning of each meeting for an icebreaking activity. Taking a few minutes to learn about the individuals in your group is worthwhile. Icebreaking activities at the beginning of each meeting, especially the first ones can build confidence and trust within the group. Marie Wallace wrote "Guide on the Side-Ice Breakers and Other Related Activities". Her article has information about forming a group, breaking the ice and building trust. http://www.llrx.com/columns/guide67.htm

If your organization wants further assurance about its members you can implement a membership application requesting for references and/or background information. Then, if the need arises you can check those references.

Making a Donation:

If you have been asked to donate to a charity and/or a fundraising event, it is within your rights to ask how funds are going to be used. We are all aware that money is tight. Asking those hard questions will help you determine the best value for your charitable donation. It is extremely important that when making a charitable donation you are doing so with confidence. If you are approached to give money it is your responsibility to ask for a project budget, a short term plan, how the entity will continue in the future (if applicable), and for information on the individuals involved in the project.

Any entity that is trying to make the community better should have this documentation and be willing to share it with their funders. If they don't have the requested information available they should be willing to follow up with the information requested. If an organization (or an individual) is unwilling or acts offended by the request… step away; there are a number of entities that are more than willing to provide you with the information you need to make the most of your generosity.

TIPS for Donors:

Requested information may include;

• Project goals and implementation plans (case statement)


• Who benefits from the project and how


• Outline of how funding is spent


• How much money is needed


• What happens if only partial funding is raisedo IRS Tax number of organization


• Good standing certification from the Secretary of State


• Responsible Parties or Board of Directors list


• Contact information

Before pledging or making a donation:

• Research the entity asking for funding- check local newspapers


• Google the organization and/or individuals involved to see if there are any red flags


• Ask friends, colleagues, and family about the organization and individuals

Further information for developing a fundraising plan can be found at Free Management Library. http://managementhelp.org/np_progs/fnd_mod/fnd_raise.htm

Making a Business Investment:

Due diligence is essential for individuals who are investing money into a business venture. Even community based ventures, like cooperatives, need to have a strong plan that shows their capacity and outlines their steps to success. Investors should ask for cash flows and projections, budget materials, business and marketing plans and resumes of the principle people.
Again, if anyone becomes offended or protests you asking for planning documents…move on to a different venture.

TIPS for Business Investors

Request Information:

• Business Plan and/or Feasibility Study


• Marketing Plan


• Financial Statements


• If already in business: current year and previous 3 years Profit and Loss statements, 3 year projections and cash flow


• If startup: 3 year cash flow and projections, start up budget and 3 year operating budget.


• Resumes of key players with references

Do your own research:

• Google other companies with similar services and product- is the market strong? Is there local competition? Is there new technology emerging in the field? What materials are needed and are they available?


• What are the businesses strengths and weaknesses? Do they have the capacity to return your investment? Is investing in the business venture worth the risk?


• Negotiate how and when you will receive a return on your investment. Have it laid out in a clear memorandum of understanding before making the investment.

For more information on planning a business: http://www.sba.gov/smallbusinessplanner/index.html





A handshake is still an extremely valued gesture of confidence and is part of why I live in Western Montana. By applying some due diligence before the handshake is made, we can ensure that the type of business lifestyle we live here for, can remain in Western Montana for our future.