Due Diligence Checklist

In order to make the due diligence as smooth and easy as possible you should have any paperwork, records, and contracts that your buyer may request immediately available. It’s not your job to do the buyer’s due diligence for them, but you are responsible for providing them with organized paperwork, tax returns, contracts, etcetera on demand so that they can review as quickly as possible.

Raising the degree to which you are organized and efficient can greatly improve your ability to maintain momentum. The last thing you want is for the buyer to become paranoid thinking that you are dragging your feet. Having the information listed below prepared to share with buyers will ensure you are not unprepared for your buyer.

  • Tax Returns

    Buyers will generally want to see the last three years’ tax returns; however, some may request up to five years.

  • Detailed Financial Statements

    It is important to have your financial statements as organized and professional looking as possible. Most buyers will want to see 3 to 5 years worth of P & L’s, balance and control sheets, and bank statements.

  • Leases

    Especially for location sensitive businesses, the buyer will want to see the exact terms of lease. The buyer will want to confirm that the lease is in fact transferrable to a new owner and under what conditions.

  • Real Estate

    If the sale includes real estate you will have to provide information on the mortgage, deeds of trust, and other liens or debts that may affect the title.

  • Contracts

    Contracts with both suppliers and customers, as well as employees. The buyer will be interested in not only the terms of any contracts, but also in whether or not the contracts are transferable.

  • Accounts Receivable

    In many small business sales the owner retains the accounts receivable. In situations where the accounts receivable are a part of the deal the buyer will want to see the aging of them and how many accounts have a history of paying late.

  • Corporate or LLC Records

    This only applies to entity sales. Your corporate records may include your articles of incorporation (and any amendments to them), a copy of your corporate bylaws, and your LLC registration information.

  • Licenses and Permits

    Not only will the buyer want to see all of the licenses and permits that are required for your type of business, but they will also be interested to discover any problems that might prevent them from being renewed.

  • Intellectual Property

    This would include any and all patents, copyrights, trademarks, and service marks. Also included in this category would be any trade secrets: recipes, unique processes or procedures, customer lists, and supplier lists.

  • Inventory

    Some buyers will do just a spot check of your inventory, while others may take the time to count, inspect, and value every single item.

  • Equipment

    Buyers will want to se original invoice, current market value, and maintenance records of any and all equipment.

  • Social Media Branding Activities

    Buyers will be curious to see current and past social media activity and accounts.