Signing a letter of intent feels like a milestone, but in many ways it’s the starting line. Once the LOI is in place, buyers launch the due diligence process: a deep dive into every corner of your business.
For sellers, this can be the most demanding stage of the process. The requests are exhaustive, the scrutiny intense, and surprises here often lead to renegotiations or even failed deals. Sellers who know what buyers will look for, and prepare accordingly, can keep control of the process and protect value.
Financial Due Diligence
For most buyers, the process begins with a thorough review of financial performance. They want to see the story of your business told in numbers, backed by accurate records and reasonable assumptions.
Expect requests for at least three years of historical financial statements, preferably audited or reviewed, along with monthly results. Buyers often ask for reconciliations between financials and tax returns, monthly bank statements, a breakdown of normalized EBITDA with support for any proposed add-backs, and forward-looking forecasts.
They’ll be assessing accuracy by checking that figures match supporting documentation, evaluating trends such as revenue growth and margin stability, and reviewing adjustments to determine if they’re reasonable. Sellers who can present organized, transparent data reduce the likelihood of drawn-out questions and repeated document requests.
Commercial Due Diligence
After the numbers are examined, buyers turn their attention to the market and customer side of the business, looking at how the company generates revenue, the stability of that revenue, and the potential for future expansion. Areas that often receive close attention include revenue concentration among top clients, customer retention rates, and price vs. volume analyses.
Competitive positioning is another factor, as buyers want to see how the business differentiates itself in its market. Here, they’ll review contracts, backlog, and recurring revenue streams to confirm that the revenue picture presented before the letter of intent matches the reality.
In some cases, buyers may conduct customer interviews or surveys to gauge satisfaction and loyalty, using the findings to confirm their confidence in the deal.
Legal Due Diligence
A well-run legal review gives buyers confidence that the business is structured cleanly and free of hidden liabilities, often covering ownership details, shareholder agreements, intellectual property rights, and pending or past litigation. Buyers will want to see major contracts, including those with customers, vendors, landlords, and lenders.
Tax compliance also comes under review, including filings, payment history, and any nexus issues that could affect obligations in multiple states. Inconsistent documentation or unclear agreements can cause delays or even raise doubts about moving forward.
For sellers, having these materials organized before the process begins can save time and prevent unnecessary tension.
HR & People Due Diligence
People are as important as financial results when evaluating a business. Buyers want to understand the organizational structure, the roles of key personnel, and the extent to which the business relies on specific individuals. Requests may include an organizational chart, signed employment contracts, and copies of any non-compete or retention agreements.
Questions about hiring practices, employee turnover, and market competitiveness of salaries are common. Buyers also assess cultural fit, especially when the acquisition will involve integrating teams. In cases where certain employees are essential to operations, buyers may consider retention bonuses or other incentives to keep them in place after the transaction.
Technology & Systems Due Diligence
For companies with significant technology or system dependencies, buyers will assess how well those tools support the current operation and future growth. They will evaluate software platforms, IT infrastructure, data security policies, and any proprietary technology.
The goal is to confirm that the systems in place can handle increased demand and align with the buyer’s standards. Cybersecurity readiness is a growing area of focus. Buyers may review how sensitive data is stored and protected, what protocols are in place for breaches, and whether employees are trained in security best practices.
Any gaps here can result in additional investment requirements after the deal closes, which can affect terms or valuation.
How Preparation Shapes The Outcome
While due diligence can feel demanding, it also offers an opportunity to reinforce the value of your business.
Having organized financials, clear legal records, stable customer relationships, and well-documented processes helps create confidence in the buyer’s mind. Sellers who prepare in advance can answer questions promptly and reduce the number of follow-ups, which keeps momentum on their side.
Buyers want to validate that the story told prior to the letter of intent matches the operational reality, since the more closely the two align, the smoother the process tends to be. Careful preparation gives you the ability to handle challenges swiftly and present your business in its most compelling form possible.
Partner With Us To Be Ready For Every Question
Due diligence may seem intense, but it’s a predictable process with clear objectives. When sellers approach it with preparation and transparency, it becomes less of a hurdle and more of a chance to strengthen the buyer’s view of the business. Each stage, from financial review to technology assessment, offers an opportunity to confirm the quality and stability of what you’ve built.
At Roadmap Advisors, we help business owners enter due diligence ready to respond with confidence. Our hands-on approach anticipates the information buyers will request and organizes it in a way that supports your story, helping to keep your deal on track and your terms strong.
If you’re currently considering selling your business or want to understand how prepared you are for buyer scrutiny, schedule a confidential consultation with our team today.