Why Due Diligence Matters
Due diligence is your opportunity to verify everything the seller has told you. It protects you from surprises, validates your valuation, and gives you leverage to renegotiate if issues surface.
Financial Due Diligence
- Verify revenue and expense trends over 3+ years
- Reconcile P&Ls with tax returns
- Validate add-backs with documentation
- Review accounts receivable aging and bad debt
- Analyze working capital requirements
Operational Due Diligence
- Assess customer concentration and retention rates
- Review key employee roles and compensation
- Evaluate supplier relationships and contracts
- Inspect equipment and technology infrastructure
Legal Due Diligence
- Review all contracts, leases, and agreements
- Check for pending or threatened litigation
- Verify licenses, permits, and regulatory compliance
- Review intellectual property ownership
Environmental and Regulatory
- Assess any environmental liabilities
- Review industry-specific regulatory requirements
- Check zoning and land use compliance
The Bottom Line
A thorough due diligence process takes 30-60 days and requires coordination between you, your attorney, your CPA, and your broker. Do not rush it.
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