Business owners often ask us about the due diligence process during initial conversations about selling their business. The process can seem overwhelming and stressful and rightfully business owners worry about what to expect and how to get through it.
First of all, at BayState Business Brokers, we are your guide throughout the entire process of selling your business, and that includes quarterbacking the due diligence process. We view our role as advising and supporting you and your team throughout the process; keeping the process on track and organized. That is what we do for every seller.
Overview of the Due Diligence Process

The due diligence process enables the prospective buyer to gather information to confirm moving forward with purchasing your business. The buyer, whether an individual buyer or a strategic buyer including a private equity firm, is doing their homework. The due diligence process can vary in terms of timeline based on the size of the business. For a smaller business, the due diligence process may be completed within 30 days while for a larger, more complex company, the process may take 90 days.
Elements of the Due Diligence Process
The due diligence process typically starts with the buyer providing a due diligence list; a list of the information about the business that the buyer wants provided for review. The due diligence list usually includes the following categories:
- Legal Information – information regarding legal formation of the business such as C-corporation or LLC as well as written documentation of ownership interests.
- Financial Data – financials are one of the most important aspects of the due diligence process as the prospective buyer reviews current financials as well as year over year information and month over month to analyze seasonality as one example. If you are thinking of selling your business, getting your financial house in order in advance is recommended. Clean financials will support a smooth due diligence process and greatly improve the overall process of selling your business. A check list of items to have prepared and organized include the following:
- Bank statements for the previous two years
- Federal and state tax returns for the previous five years
- A backup file of your financial system (e.g., QuickBooks)
- Year over year financial statements (balance sheet and P&L)
- Month over month financial statements (balance sheet and P&L)
- HR Data – this data is also very important to the due diligence process and is an area where many business owners benefit from having this information well-organized and clean in advance of the process starting. HR data includes all employee insurance information (e.g., health insurance), employment contracts, documented company policies and company handbooks, retirement accounts and profit sharing accounts, health plans and employee data.
- Company Insurance Information – this includes current policies for liability, workers compensation, umbrella policies and directors and officers (D&O) insurance.
- Operations – this category of information includes providing all existing contracts whether with customers/clients, suppliers/vendors, maintenance contracts etc. Additional operations information include operations manuals, documented processes, listing of assets and depreciation schedules.
- Real Estate – if the business includes real estate, the buyer will seek a current real estate appraisal, status of and recent building inspection results and an environmental survey if applicable.
- Licenses – supporting detail regarding licenses associated with the business such as industry specific or state specific licenses.
- Intellectual Property – the buyer will want to confirm any intellectual property that is included in the sale of the business to understand filings, costs and timelines. This includes trademarks and patents.
A site visit is typically part of the due diligence process and a component of the process that can be overlooked by the seller and the team as they focus on organizing and providing the above information on the list. Do not underestimate the importance of the site visit. We strongly recommend putting in the effort in advance to present your business in its best light. This includes cleaning and getting organized in advance so this is not a last minute effort. A site visit can and does affect perceptions of your business and how it is managed. A site visit may also include equipment inspections.
Company Resources to Involve
So who do you need to help you prepare for the sale of your business when it comes to the due diligence process? Based on the above list, you want your bookkeeper, controller or CFO, depending on the size of your business, as the lead to organize the financials, working with your accountant to provide clean, well-organized financial data.
For all human resources information, have your HR person or office manager lead the effort involving your benefits and insurance providers.
Attorneys should provide the corporate information including contracts and intellectual details.
Getting Organized & Prepared for the Due Diligence Process
Whether you are thinking of selling soon or in the coming years, you can start taking steps forward now. Review the above list and prioritize where your business needs some attention. Are there categories of information that should be better documented or need to be updated? Put together a plan to start chipping away at the areas that will improve the value of your company to a prospective buyer.
When you are ready to market your business for sale, a professional business broker will assist you every step of the way; setting up the processes and data repositories for efficient and secure data sharing including trusted advisors such as your CPA and attorneys. At BayState Business Brokers, we lead the due diligence process working with your team and coordinating with the prospective buyer’s team so it is efficient and organized from the start.
Don’t let the due diligence process concern you. We’ve got your back when you decide it is time to sell and move on to the next step in your journey.
Contact us to discuss your goals and your timeline. We look forward to the opportunity to help.
For additional information related to preparing to sell your business, read what strategic buyers look for in a business.