Get Ready for Due Diligence

Due Diligence is defined by the Business Dictionary as follows:

Due Diligence is defined by the Business Dictionary as follows:

Due diligence is the stage where a buyer verifies that your business is everything it appears to be. It is also where many deals lose value or fall apart, usually over issues that could have been resolved long before a buyer ever looked. Preparing early is one of the most reliable ways to protect your price and keep a transaction on track.


First Choice Business Brokers (FCBB) has guided owner exits since 1994. We look at your business the way a buyer will, before it goes to market, so the surprises that derail deals get handled in advance. The checklist below shows you where to start.


What Due Diligence Means

In plain terms, due diligence is the careful review a reasonable buyer is expected to perform before committing. It generally covers four duties:

  1. General. The prudence, responsibility, and care a reasonable person would exercise in the circumstances.
  2. Business. The duty of a company's directors and officers to act prudently in evaluating the risks in a transaction.
  3. Investing. The duty of the buyer to gather the information needed to understand the actual and potential risks of the investment.
  4. Negotiating. The duty of each party to confirm the other's expectations and independently verify the other's ability to meet the terms of the agreement.


What This Means for You as a Seller

It means looking at your business the way a buyer would. Whether you run a multimillion-dollar company or a single restaurant, buyers are cautious about what might be hiding below the surface. The goal is to clear up potential issues and questions before they come up. Depending on your business type and size, that cleanup can take a year or more, which is why it is rarely too early to begin. Starting now, with an advisor who can guide the positioning, gives you the most room to protect value.


Your Pre-Due-Diligence Checklist

Working through these items before going to market removes the discounts buyers apply when they find open questions on their own.


  1. Clean, understandable books. Buyers expect that you take legitimate write-offs, but those entries should be easy to see and understand. Clean financials are the single biggest factor in avoiding buyer discounts.
  2. A/P and A/R aging. Review your accounts payable and accounts receivable aging. Slow-paying or non-paying customers can make a buyer uneasy, so address them early.
  3. Clear ownership. Make sure the legal ownership of the business is clear, with no undisclosed partners. If there are, clean up the ownership structure now.
  4. Current contracts. Outdated customer or vendor agreements are a good thing to refresh. Valid, current contracts in place are consistently appealing to buyers.
  5. Documented roles. If you have a strong team but have never defined what each person does, capture it simply: name, title, duties, and how and what they are paid. Your First Choice advisor can use a simple employee questionnaire to gather this without breaking confidentiality.
  6. A training plan. Decide what role each active owner will take in training a new owner. Buyers want to know the transition will be supported.
  7. Government accounts in order. Confirm your tax and employment accounts are current, and be ready in case an audit is required.
  8. Resolve litigation. Even matters you consider minor should be addressed. Buyers and their lenders will want to see open litigation resolved.
  9. Good standing. Verify your licensing and corporate registration are in good standing with state and local authorities. This is easy to check and remedy if needed.
  10. Memorialize your growth plan. If you built a business plan you never had the time, money, or energy to implement, a buyer may see real value in it. Write it down, share it in general terms upfront and in detail during due diligence, and the plan may pay off even if someone else carries it out.


How First Choice Business Brokers Helps

We assess your business from the buyer's perspective first and only recommend going to market when we believe it can sell and you agree it is the right time. That same buyer's-eye view is what prepares you for due diligence. We help you find and resolve the issues that buyers and lenders look for, so the verification stage confirms your value rather than chipping away at it.


Preparation pays off in the numbers. About 87% of the businesses we take to market close, sellers receive about 94% of asking on average, and once on the market our average time to close is about 4.7 months, compared with an industry range of 9 to 12 months. Nobody at FCBB gets paid until your business sells, so our focus stays on getting you to a clean close.


First Choice Business Brokers serves the Mountain West across Utah, Montana, Wyoming, and Colorado, with a focus on businesses in the $1 million to $10 million enterprise value range. Your advisors are Mike and Lynn Lee, Team Lee. Mike Lee is Principal Broker and a Certified Exit Planning Advisor (CEPA).


Start Preparing Now

The earlier you prepare for due diligence, the more value you protect. A good first step is the free Market Readiness and Value Assessment, which shows you where the open questions are before a buyer finds them. No listing agreement is required to start.