Beyond the Exit: Mastering the Art of the Investor’s Due Diligence

Most people might shudder at the thought of spending an entire day on meticulous due diligence. However, for Will Duke, a successful entrepreneur turned investor and a valued member of the Lifestyle Investor Mastermind, this rigorous approach isn’t just a necessity; it’s the cornerstone of his success. In addition to crafting detailed spreadsheets with over a hundred tailored questions for each potential investment, whether it is in real estate or another asset class, his investing method is characterized by an unwavering commitment to thoroughness. For example, his comprehensive list is sent before he engages in a conversation with a sponsor, so he expects a thoughtful and proactive response.

This isn’t just about gathering information, it’s a litmus test that must be passed. The sponsor’s responsiveness, transparency under scrutiny, and fundamental alignment with Will’s processes are closely observed by Will. There is no doubt that this methodical approach is not just prudent, but it can also be a powerful tool capable of both creating wealth as well as safeguarding it.

The Foundational Lessons Forged in Sales

During Will Duke’s early career in sales, he navigated the complexities of selling postage meters for Pitney Bowes. As a result of this role, he was able to sharpen his sales acumen and instill the desire to consistently strive for excellence. While participating in a company golf tournament in Florida, however, an inspirational moment struck. When Will walked along the golf course surrounded by opulent homes, his curiosity spurred him to investigate the owners’ professions. The recurring answer? Business owners or high-level executives.

After this revelation, he was compelled to forge his own path, outside of the confines of traditional corporate structures. Following a period in the golf industry, Will co-founded a security integration business. He initially focused on residential security systems and satellite TV, but his vision quickly grew. Ultimately, he secured enterprise clients with extensive networks encompassing tens of thousands of IP cameras by strategically turning the company to business-to-business services.

Building and Scaling for Strategic Exits

Eight years into this venture, Will and his partner identified a significant market gap. Having been unable to find a project management platform that met their specific operational needs, they developed their own internal software solution. Originally conceived as a tool to streamline internal processes, it soon became a distinct and promising software firm.

In 2021, Will and his partner recognized that the right time had come to explore potential sales from both the security integration business and the burgeoning software company. For the first time, they engaged in an intensive learning process, partnering with an experienced broker, to navigate the complexities of mergers and acquisitions. In response to ten potential acquirers and five letters of intent, acquisition offers began to escalate. After selling his shares in the software company, Will orchestrated the sale of their security integration business to a larger company.

It was a high-pressure process, but Will and his partner were committed to maintaining their relationship. According to their guiding principle, projects should not be closed at the expense of friendships or family connections. In keeping with their word, their families continued their tradition of vacationing together once the deals were signed.

Navigating the Landscape After the Exit

While the sale of a business is often portrayed as the ultimate achievement, the reality is more nuanced. Following the acquisition, Will stayed on to facilitate a smooth handover to his long-term team members. After the sale, however, unforeseen challenges emerged, including disruptions to the supply chain, evolving leadership dynamics, and a sense that his contributions were no longer as meaningful. In March 2023, he announced his resignation.

As a result of this transition, unexpected emotional challenges were encountered. His wife, Avery, asked him: “Are you running away from something or towards something? ” Will’s honest response was simply, “I don’t know.”

Redefining Purpose and the Meaning of Wealth

As a business owner without the daily demands of running a business, Will found himself in a new emotional environment. He wasn’t unhappy, but felt unfulfilled. As Will reflected on Arthur C. Brooks’ work on happiness, he recognized that extraordinary goals and lasting joy could be at odds. According to Brooks, happiness and unhappiness reside in separate neurological pathways.

Despite the fact that financial freedom doesn’t automatically translate into happiness, Will found that it alleviated considerable stress. Nevertheless, this newfound financial independence brought with it a new and significant question: What now? How would his actions in this new chapter be defined and driven by his purpose?

The Power of Education, Reflection, and Action

Initially, Will’s answer was simple yet profound: education. In addition to calming his anxiety, learning provided him with a renewed sense of focus. With this mindset, he explored resources on passive income and intentional living, connecting with a community of like-minded individuals.

As Will’s journey demonstrates, becoming an investor is not solely about accumulating financial gains. It’s a process of reinvention, requiring introspection and a lifelong commitment to learning.

The Primacy of Experience Over Influence

With today’s information-saturated world, it is easy to mistake social media prominence for financial expertise. Real-world experience, however, produces true wisdom–navigating both successes and setbacks, learning from mistakes, and adapting strategies based on results.

As a result of his own investing journey, Will Duke highlights the importance of learning from those who have proven to be the ones who have “done the work.” His own journey proves the value of hands-on experience and educational experience far outweighs the lustre of superficial trends and hype.

From FOMO to Framework: Investing with Intentionality

People new to investing should cultivate a disciplined and strategic approach rather than rush into deals driven by fear of missing out (FOMO). Building a robust investment framework grounded in clarity and intention becomes the priority.

Here are some of the key steps;

• Defining clear investment criteria. A specific set of parameters should be established before any potential investment is evaluated.
• Understanding personal goals. The alignment of financial and lifestyle objectives with investment strategies.
• Assessing current and desired asset allocation. A clear picture of current holdings and the desired future state is obtained.
• Identifying deal-breakers and must-haves. For any investment, there should be non-negotiable criteria and essential elements.

Will’s own experience illustrates this principle perfectly. In his first year, he focused on comprehensive education and understanding the fundamentals, rather than investing in more than one deal. In the following year, he was able to engage in over 25 deals with confidence and strategic thinking thanks to this foundational knowledge.

Mastering the Language of Investing Through Education

As Will readily admits, learning about investing was like learning another language. It was initially difficult to understand acronyms such as IRR (Internal Rate of Return) and cash-on-cash returns. Instead of pretending to understand, he actively sought clarification.

Will said he would input these terms into AI tools and ask for explanations as if he were a fifth grader. His wife, Avery, even listened to him explain the nuances of each deal in simple, accessible language, as he built spreadsheet models and asked questions relentlessly.

His pursuit of clarity became a personal benchmark: if he cannot explain it clearly to his wife, then he does not understand it well enough to invest.

The Power of Deliberation Over Excitement in Due Diligence

One of Will’s most impactful habits was consciously checking his enthusiasm. Whenever he invested in a familiar industry, such as technology, he asked himself: Do I truly understand the nuances of this deal, or am I simply excited because it is familiar?

Often, he would follow up with sponsors by summarizing their pitch in writing, specifically requesting corrections or clarifications. By doing so, he not only solidified his own understanding but also protected himself against costly misunderstandings.

Investing as a Collaborative Endeavor

In the world of investing, Will and Avery work together as a team. In addition to attending events, they also spend time learning together. Investing is more than just a financial transaction to them; it is an integral part of their shared future. Collectively, they make investment decisions with clarity and confidence that is unwavering.

A collaborative approach to major financial decisions emphasizes the importance of shared understanding and alignment among partners.

The Priceless Value of Diligent Due Diligence

Among Will’s most valuable lessons is that neglecting proper due diligence has profound costs. In addition to financial losses, ill-conceived investments drain valuable energy and cause long-term problems.

According to him, he believes in the power of positive energy over negative energy. Bad investments can drain you of your life, he says.

Currently, he is committed to performing due diligence in a hands-on manner. He personally visits warehouses, speaks directly with employees, and meticulously reviews financial records. Before committing capital, he pays close attention to how money flows through a business, trusting his intuition and hard-earned experience.

Conclusion: Embracing the Long-Term Investing Journey

As he masters complex tax strategies and diligently vets potential deals, Will demonstrates a fundamental truth in investing: long-term success does not come from following fleeting trends, but rather from mastering core principles and adopting a long-term approach.

Ideally, you should start thinking three to five years ahead of an exit. Like Monopoly, learn the rules of the game. To succeed in the financial landscape, you must understand its rules, he says.

Finally, remember that emotional decisions can be costly in the world of investing. As such, to achieve long-term financial success and a life of intentionality, true education and diligent preparation are priceless assets.

Key Takeaways

• Due Diligence is paramount. With extensive questioning and observation, Will’s meticulous approach to due diligence is a vital tool for both identifying promising investments and avoiding costly pitfalls.
• Business experience informs investment strategy. In evaluating investment opportunities, Will’s entrepreneurial background in sales and building scalable businesses provides a valuable perspective.
• Education is a continuous and essential process. For informed decision-making, it is crucial to continuously educate oneself on investing and financial terms.
• Investing is more about intention than excitement. By focusing on a well-defined investment framework instead of jumping into deals based on hype or familiarity, we achieve more strategic results.
• Understanding the “why” beyond financial returns. In Will’s case, aligning investment decisions with personal goals and seeking investments that go beyond monetary gains were key steps to success.
• There is no substitute for real-world experience. Rather than relying on superficial online presence, it is important to prioritize insights from those with proven track records and hands-on experience.
• Shared understanding and collaboration enhance investment success. A partner or spouse can provide clarity, confidence, and stronger results by engaging in the learning and decision-making process.

Featured Image Credit: Tima Miroshnichenko; Pexels: Thank You!