Due Diligence Checklist: What Buyers Will Ask For

Due diligence is the phase of a business sale where the buyer verifies everything you've told them. It's thorough, time-consuming, and — if you're not prepared — it can delay or kill your deal.

The best defense is preparation. Knowing what buyers will ask for and having it organized before you go to market saves time, builds buyer confidence, and protects your valuation. Here's what to expect.

Financial Due Diligence

This is the most extensive category. Buyers and their accountants will want:

Historical Financials

• 3-5 years of tax returns (business and potentially personal for pass-through entities)
• 3-5 years of profit & loss statements (monthly and annual)
• 3-5 years of balance sheets (monthly and annual)
• Year-to-date financial statements (current year)
• General ledger detail for the most recent 2-3 years

Revenue Detail

• Revenue by customer (to assess concentration)
• Revenue by product/service line
• Revenue by month (to assess seasonality and trends)
• Pipeline or backlog report (if applicable)
• Pricing history and rate sheets

Expense Detail

• Add-back schedule documenting all owner-related and non-recurring expenses
• Vendor contracts and terms
• Largest expense categories with detail
• Payroll reports including owner compensation history

Cash and Debt

• Bank statements (12-24 months)
• Accounts receivable aging report
• Accounts payable aging report
• Outstanding debt schedule (loans, lines of credit, equipment financing)
• Capital expenditure history and forecast

Legal Due Diligence

Corporate Documents

• Articles of incorporation or organization
• Operating agreement or bylaws
• Ownership structure (cap table, member interests)
• Minutes from board or member meetings
• Good standing certificates

Contracts

• Customer contracts (especially top 10-20 customers)
• Vendor and supplier agreements
• Lease agreements (real estate and equipment)
• Partnership or joint venture agreements
• Non-compete and non-solicitation agreements
• Franchise agreements (if applicable)

Litigation and Disputes

• Pending or threatened litigation
• History of past legal disputes and resolutions
• Regulatory actions or investigations
• Product liability claims or warranty disputes

Intellectual Property

• Trademarks, patents, copyrights
• Domain name registrations
• Software licenses (owned and third-party)
• Trade secret protections

Operational Due Diligence

Employees

• Employee roster with titles, start dates, compensation
• Organizational chart
• Employee handbook and policies
• Benefits summary (health, dental, 401k, PTO)
• Employment agreements for key employees
• Independent contractor agreements (and classification analysis)
• Workers' compensation history and claims
• Turnover data for the past 3 years

Operations

• Standard operating procedures (SOPs)
• Technology stack and software subscriptions
• Key vendor and supplier relationships
• Quality certifications (ISO, industry-specific)
• Insurance policies (general liability, E&O, property, cyber, etc.)

Facilities

• Lease terms and renewal options
• Facility condition and maintenance records
• Environmental assessments (if applicable)
• Zoning and permits

Customer Due Diligence

• Top 20 customer list with revenue and tenure
• Customer concentration analysis
• Customer retention/churn rates
• Net Promoter Score or satisfaction data (if available)
• Sales pipeline and CRM data
• Marketing spend and customer acquisition costs

Compliance and Regulatory

• Business licenses and permits
• Industry-specific regulatory compliance
• OSHA records (if applicable)
• Environmental compliance
• Data privacy compliance (if handling personal data)
• Tax compliance (sales tax, payroll tax, property tax)

How to Prepare for Due Diligence

Start Early

Ideally, begin organizing your due diligence materials 6-12 months before going to market. This gives you time to fill gaps, clean up issues, and present a professional package.

Use a Virtual Data Room

Set up a secure virtual data room (VDR) to organize and share documents. Platforms like Dropbox, Google Drive (with proper permissions), or dedicated VDR software work well. Organize documents by category matching the sections above.

Identify Gaps

Go through this checklist and flag anything you don't have. Missing documents slow down due diligence and create uncertainty. Common gaps include:

• Informal customer agreements (no written contracts)
• Incomplete employee files
• Missing corporate minutes
• Outdated operating agreements

Fix Issues Before They're Found

If you know about problems — a pending dispute, an expired license, a tax issue — address them proactively. Discovering problems during due diligence erodes buyer confidence and gives them leverage to renegotiate price.

Prepare Your Team

Your bookkeeper, CPA, and attorney should all know that a due diligence process is coming (when appropriate from a confidentiality standpoint). They'll be fielding questions and providing documents throughout the process.

What Happens If You're Not Prepared?

Poorly prepared sellers face predictable consequences:

• Extended timelines — due diligence drags on as buyers wait for documents
• Price reductions — buyers renegotiate when they find surprises
• Deal fatigue — both parties lose momentum and enthusiasm
• Dead deals — buyers walk away from messy situations

Conversely, well-prepared sellers close faster, maintain their price, and have smoother transitions.

The Bottom Line

Due diligence doesn't have to be painful. If you treat it as a preparation exercise rather than a scramble, you'll be in a much stronger position when offers come in.

If you'd like help organizing your due diligence materials or understanding what buyers in your industry specifically focus on, let's connect. Preparation is one of the highest-ROI activities a business seller can invest in.