When conducting a commercial due diligence project, accuracy is absolutely critical as potentially multiple million-dollar decisions will be made based on the results of the effort. Accuracy is a somewhat complicated issue as it implies getting answers from people that are knowledgeable to answer, and also getting answers that are clear and actionable.

To fairly represent the customer base of a company, it is important to include individual contacts in approximate proportion to their revenue contribution. So, if 15 companies provide 80% of a company’s revenue, individuals from those 15 companies should comprise roughly 80% of the customer contacts developed for a survey. This can be accomplished by identifying multiple contacts at larger accounts and single contacts at smaller accounts.

Within each account, individuals to be included in the survey effort should be those with direct knowledge of suppliers’ performance. Typical functions or titles include purchasing, operations, quality control, logistics/delivery, and engineering/product development. At smaller accounts, purchasing or executive contacts are often individuals with the best overall perspective of a supplier.

Questions included in the survey instrument should be direct and easily understood. Most customer surveys ask for ratings of performance for a series of attributes defining the company’s product and service offering. It is helpful to group these by functional area – product performance, sales, customer service, technical support, etc. Within each area, attributes should be clear and concise. So, “delivers products and services in a time-frame that meets your needs and expectations” would be better phrased as “on-time delivery.”

In addition to performance rating questions, it is wise to use the opportunity created by the survey to gather additional insight into strategic issues and questions. Most answers can come from a systematic analysis of rating questions. However, other issues may require additional questions to elicit the necessary information. Some strategic concerns PMG has addressed in commercial due diligence efforts include:

• What is the cause of lower sales performance in one region compared to another?
• What has been the impact of a poor management decision in the past and what is the likely future financial impact?
• What is the perceived price differential between the target and competitors? Is there any upside pricing opportunity?

To address these more nuanced concerns may require additional questions dealing with the frequency of purchase, customer share, ordering preferences, etc.

In commercial due diligence, as in most ventures, planning is the biggest determinant of success. An hour spent planning will save four hours of scrambling in data collection or analysis. And in surveys, it is extremely difficult and sometimes infeasible to go back and get answers late in the process.