Due diligence

The buyer's verification phase before completing a purchase: books, contracts, licences, staff, and claims all get checked against evidence. Deals die here more than anywhere else.

After a price is agreed in principle, the buyer (with an accountant and a lawyer) verifies that the business is what the seller claimed: revenue traced to bank deposits, profit reconciled to filings, the lease read, licences checked, contracts and staff arrangements reviewed, and every add-back tested for evidence.

Two things kill deals in diligence: surprises and unprovables. A known problem disclosed early is a negotiation; the same problem discovered late reads as concealment and poisons trust in every other number. And profit that cannot be evidenced is treated as profit that does not exist.

Sellers who maintain a simple, current document folder (books, licences, insurance, lease, key contracts) walk through diligence; sellers who reconstruct one under deadline mostly do not. The preparation lives in clean books and the compliance checklist.