Problem prospects can drag down economic development efforts, but due diligence on companies seeking incentives can help economic development organizations reduce risk, increase the return on investment and improve accountability to stakeholders. The more you know about a company, the better deal you can create for both the business and your community.

If you are considering offering incentives to a company, here is what you should know about that firm:

  • A description of their products or services
  • Location of existing operations
  • Major customers
  • Growth projections and strategies
  • Recent restructuring and management changes
  • Executive background
  • Ownership details
  • Company credit rating
  • Financial structure
  • History of past incentives negotiations

A community’s decision to grant incentives to a company must be made on a foundation of reliable data and solid analysis.  Due diligence on companies allows economic development organizations to be a more equal partner in negotiations with applicant firms and to identify red flags that might indicate a potential problem deal. 

Economic developers are also increasingly expected to offer greater accountability and transparency for their incentive decisions. Due diligence can identify past problems, weak business prospects and questionable finances that might keep the community from achieving its expected return on investment.