Key points
- Due diligence usually runs a couple of weeks, and the buyer's deposit is generally refundable until it ends.
- Unreconciled or stale books are the top reason deals die.
- Surprises hurt more than the problem itself.
- Keep every document in one organized folder.
What due diligence is
After an accepted offer, the buyer checks that the company matches what was presented. This usually takes a couple of weeks, and the deposit is generally refundable until it ends.
Standard requests include tax returns, profit and loss statements, a balance sheet, bank statements, the lease, an asset list with vehicle numbers and an employee roster.
Books that do not tie out
If the profit and loss statement, tax returns and bank deposits tell different stories, trust drops fast. Unreconciled books can end a deal even when earnings look strong.
Update the statements with your CPA before going to market, and keep the latest twelve months current.
Stale details
A balance sheet that still lists a truck you sold years ago signals weak bookkeeping. Small errors make buyers wonder what else is wrong.
Surprises
A buyer will find the problem eventually. Telling them first, with a plan to fix it, keeps you in control. Hidden problems found by the buyer cost price or the whole deal.
Payroll and compliance
Buyers check how workers are paid and classified. Off the books pay is a major red flag. Make sure payroll records, workers compensation coverage and licenses are in order.
Lease and landlord delays
Landlord approval of a lease assignment can take weeks. Start early so it does not hold up closing. See the bulk sale notice for another timing item.
How to be ready
- One shared folder with every requested document
- Reconciled books and a current balance sheet
- Lease, licenses and insurance in one place
- A short list of known issues and your plan for each
Keep the deal moving
Answer requests fast and in one place. Slow replies make buyers nervous, and lenders repeat many of the same requests, so a shared folder saves days.
Keep running the company at full speed. A dip during review gives the buyer a reason to renegotiate.
When you want to know what to expect, request a value estimate.