Diligence guides

3 years of tax returns reconciled to P&L

The seller's last three years of federal business tax returns, checked line-by-line against the P&L statement they've shown you.

QoE (quality of earnings) on add-backs over $50k

An independent review of the seller's claimed "add-backs" — expenses they say aren't really part of running the business (owner's personal car, one-time legal fees, etc.) — that push up the earnings number buyers pay a multiple on.

A/R aging & bad debt history

A breakdown of how old the business's outstanding customer invoices are, and its track record of debts that were never collected.

Customer concentration (top 10 = ?%)

What share of total revenue comes from the business's ten largest customers.

Revenue churn / customer count trend

How the business's customer count and recurring revenue have trended over the past few years — who's leaving, who's new, and whether the base is growing or shrinking.

Working capital target peg

The agreed-upon amount of working capital (cash, receivables, inventory minus payables) the seller must leave in the business at closing so it can keep operating without an immediate cash injection.

Capex history & deferred maintenance

How much the business has spent on equipment, facilities, and infrastructure over time, and what's been put off that a new owner will inherit.

Org chart + comp by role

A full map of who works in the business, what they do, and what they're paid — including any family members or the owner.

Key-person risk + retention plan

An assessment of which employees (including the owner) the business would struggle to operate without, and what plan exists to keep them through and after the transition.

Owner's calendar audit (where does the time go?)

A realistic look at how the current owner actually spends their working hours — sales, operations, admin, or things a hired manager could never replicate.

Lease & assignability

Whether the business's real estate lease can transfer to a new owner, on what terms, and for how long.

Tech stack / systems inventory

A list of the software, hardware, and systems the business runs on — POS, accounting, scheduling, custom tools — and who owns/administers them.

License / certification transferability (CPA, contractor, etc.)

Which professional licenses or certifications the business depends on to legally operate, and whether they transfer to a new owner or must be re-earned.

SBA pre-qualification (Live Oak, Pursuit, Huntington, Newtek)

Getting a specific SBA 7(a) lender to review your financials and the deal terms before you're deep into a purchase agreement, so financing is a known quantity, not a hope.

Seller financing willingness

Whether the seller will finance part of the purchase price themselves (a seller note), typically standing behind the SBA loan.

Non-compete & transition period (90-180 days standard)

The seller's contractual commitment not to compete with the business after closing, plus how long and how involved they'll stay to help transition operations, customers, and staff.

Working capital + transition consulting agreement

The written agreement covering both the working capital left in the business at closing and any paid consulting arrangement for the seller's post-close help.

Indemnity, escrow, R&W coverage

The purchase agreement provisions that protect you if a seller's representations turn out to be false, and the escrow holdback that gives you a real remedy if that happens.

UCC, lien, litigation search

A search of public records for liens against the business's assets (UCC filings), unresolved lawsuits, and judgments that could follow the business or its assets into your ownership.