What is due diligence?
Due diligence is a buyer’s detailed investigation into a business before completing the purchase. It allows them to verify financial, legal, and operational information to ensure they’re buying what they think they are. A well-prepared seller inspires confidence and keeps the deal on track.
Key areas buyers examine
1. Financial performance
Buyers will want to see clean, transparent, and well-organised financial records. Expect requests for:
- Profit and loss statements, balance sheets, and tax returns (typically for the last 3 years)
- A breakdown of revenue streams and expenses
- Debtors, creditors, and cashflow reports
- Evidence of add-backs and normalisations used in the business valuation
If your accounts are clear and professionally prepared, it strengthens your position and reduces negotiation friction.
2. Legal structure and compliance
Buyers will check the legal foundations of your business to ensure there are no hidden liabilities. This includes:
- Business registration and ownership documentation
- Contracts with staff, suppliers, and clients
- Lease agreements and property rights
- Intellectual property ownership (logos, trademarks, patents)
- Licences, permits, and compliance with industry regulations
Having all of these readily available shows buyers that your business is legitimate and low-risk.
3. Operations and systems
Beyond the numbers, buyers want to understand how the business actually runs. They’ll look for:
- Operational manuals and process documentation
- Supply chain details and key supplier relationships
- Technology, software, and equipment lists
- Staff structure, employment agreements, and training systems
A business with clear systems and minimal owner dependency is far more appealing — and easier to transition.
4. Customer and market position
Buyers will assess your customer base and market standing to gauge the business’s sustainability. They’ll review:
- Customer concentration (are sales dependent on a few key clients?)
- Retention rates and recurring revenue
- Marketing strategies and brand reputation
- Industry trends and competitive positioning
A diverse, loyal customer base and a strong market reputation can significantly boost buyer confidence.
5. Risks and opportunities
Buyers will identify any potential red flags, such as pending disputes, outdated systems, or reliance on one key person. Addressing these issues early shows transparency and prevents surprises that could derail the sale.
How to prepare for due diligence
- Get organised early. Start gathering your documents before listing the business — it will save time and stress later.
- Work with your broker. They’ll guide you on what buyers will expect and how to present information effectively.
- Engage your accountant and solicitor. Professional advice ensures accuracy and protects your interests.
- Be transparent. Buyers respect honesty. Disclosing minor issues upfront builds trust and prevents last-minute complications.
Moving forward
Preparation is the key to a seamless due diligence process. The more organised and open you are, the more confident buyers will feel, and the faster you’ll get to settlement. With the right guidance from your LINK Broker, you can present your business in the best possible light and keep your sale moving forward.
Ready to take the next step? Get in touch with us here.
