Due Diligence Checklist: What Buyers Will Ask For

Financial due diligence is the most scrutinized area of any deal. Buyers and their accountants will reconstruct your financials to verify revenue quality, profitability, and cash flow sustainability. Have these ready before you go to market.

• 3 years of profit & loss statements (monthly and annual)
• Balance sheets for each fiscal year-end
• Federal and state tax returns for the past 3 years
• Accounts receivable and accounts payable aging reports
• Revenue broken down by customer, product, and channel
• Cash flow statements showing operating, investing, and financing activities

Buyers need to know that the business is legally sound — free of hidden liabilities, properly structured, and in compliance with all applicable laws and regulations.

• Corporate formation documents (articles of incorporation, operating agreements, bylaws)
• All material contracts — customer, vendor, lease, and partnership agreements
• Litigation history and any pending or threatened lawsuits
• Intellectual property ownership records (trademarks, patents, copyrights, domain names)
• Regulatory licenses, permits, and compliance certifications
• Any outstanding liens, encumbrances, or guarantees on business assets

Buyers want to understand how the business actually runs day-to-day. The more documented and systematized your operations are, the more confident a buyer will be that the business can thrive without you.

• Standard operating procedures (SOPs) for key business functions
• Complete employee roster with roles, tenure, and compensation
• Organizational chart showing reporting structure
• Key person dependencies — who is critical to the business and why
• Technology stack overview (software, hosting, integrations, licenses)
• Vendor and supplier relationships with contract terms

Revenue is only as good as the customers behind it. Buyers will analyze your customer base to assess concentration risk, retention strength, and growth potential.

• Customer concentration analysis — percentage of revenue from top 5 and top 10 clients
• Customer churn rates (monthly and annual) with trends over time
• Net Promoter Score (NPS) or other customer satisfaction metrics
• Key contract terms including renewal dates, auto-renewal clauses, and termination provisions
• Sales pipeline and backlog of signed but undelivered orders
• Customer acquisition cost (CAC) and lifetime value (LTV) metrics

People are often the most valuable asset in a business. Buyers will evaluate whether the team is stable, properly compensated, and protected by appropriate agreements.

• Employment agreements for all key employees
• Benefits summary — health insurance, retirement plans, PTO policies
• Non-compete, non-solicitation, and confidentiality agreements
• Key employee retention plans or stay bonuses for the transition period
• Workers' compensation claims history
• Independent contractor agreements and classification compliance (1099 vs W-2)

Tax issues discovered after closing can create serious liability for the buyer. Expect their tax advisors to scrutinize every filing, nexus question, and pending obligation.

• State and federal tax compliance history with all filings current
• Sales tax nexus analysis — every state where you collect or should collect sales tax
• Transfer pricing documentation for any intercompany transactions
• Pending or recently completed tax audits and their outcomes
• Property tax records and assessments
• Tax credits, incentives, or deferred tax liabilities on the books