What a buyer checks first in due diligence

Before a buyer talks about price, they check whether your numbers hold up. Founders often prepare the story of the business and leave the evidence for later. Buyers do the opposite.

Three areas come first, and all three can be prepared months before anyone signs a letter of intent.

Revenue that can be traced

A buyer will pick sales at random and ask to see the contract, the invoice and the payment that matches. If any of the three is missing, they widen the sample, and the process slows down.

• A contract or order for every material customer.

• Invoices that match the contract terms.

• Payments that match the invoices, with credit notes explained.

Working capital that is normal

Most deals include a working capital target. If the months before the sale look unusual, because stock was run down or suppliers were paid late, the buyer will adjust the price. Knowing your normal level, month by month, is the best defence.

“The surprises a buyer finds always cost more than the problems you disclose.”

Adjustments you can explain

Owner salaries above market rate, one-off legal costs, a property the company rents from the founder: each of these changes the profit a buyer is paying for. List them yourself, with evidence, before the buyer does.

Where to start

Pull the last three years of accounts and the current year. Mark anything you would struggle to explain in one sentence. That list is your preparation plan, and it is usually shorter than founders fear.

Customers and contracts

Buyers look hard at concentration. If one customer brings in a large share of sales, they will read that contract closely: how long it runs, what notice it needs and whether it changes when the company is sold. A change-of-control clause found late can stall a deal for weeks.

Put the material contracts in one folder now, with a short note on each: start date, end date, notice period and anything unusual. A buyer’s adviser will ask for exactly that list in the first week, and a company that hands it over on day one sets the tone for everything that follows.

Demo article: written to show the layout, not as advice for your company.