The free diligence checklist

91 items, staged into the four moments a buyer actually experiences a deal, plus a short list of things you can check yourself before you ever ask the seller. The whole list is free, in your account, with status tracking per item.

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Stage 1: After the NDA

What a seller or broker will actually hand over once you have signed an NDA and before you have priced an offer. Tax returns lead. 20 items.

1.Three years of business tax returns, every page (aka the 1120-S, 1065 or Schedule C your lender will spread)
2.Three years of year-end financial statements, profit and loss and balance sheet (aka the seller's P&L and balance sheet, or the financials behind the CIM, the broker's confidential information memorandum)
3.This year's financials so far, compared to the same months last year (aka interim or YTD financials)
4.A schedule of every business loan, lease and credit line: lender, balance, rate, payment and collateral (aka the debt schedule)
5.Revenue concentration by percentage: what share of revenue comes from your top customer, your top 5, and your top 10, names not needed yet (aka customer concentration)
6.Revenue by product or service line for three years, the current price list, the date of the last price increase, and an explanation of the slow and busy months
7.The seller's list of adjustments to profit, with a dollar amount for each one (aka add-backs, or the seller's discretionary earnings (SDE) recast)
8.Owner pay for the last three years, W-2, K-1 and any distributions, for every owner (aka the owner comp add-back)
9.Any payments between the business and its owners: rent to a building an owner owns, loans to or from owners, or services bought from a related company (aka related-party transactions)
10.A complete list of the equipment, vehicles and other assets included in the sale, with year, make/model, serial or VIN, and condition
11.Who controls the trademarks, patents, licenses, domain name, website, phone number and social accounts, and confirmation they transfer to you
12.Every employee's role, pay, and full-time or part-time status, names not needed yet
13.Who actually runs things when the owner is away, and when the owner last took two consecutive weeks off
14.Who owns the business today, and roughly what percentage each owner holds
15.A plain answer: is there any lawsuit, judgment or lien against the business right now?
16.Which licenses and permits the business holds, and whether they transfer to a new owner
17.The current lease with every amendment and renewal option, or, if the seller owns the building, the proposed lease or purchase terms and what market rent actually is
18.Everything the owner personally does: sales, quoting, pricing, banking, the relationships that matter (aka the owner-dependency map)
19.The reason for the sale, in writing
20.Any license or certification the seller holds personally that the business needs in order to operate

Stage 2: Right after the LOI, required

28 items

What the seller can produce easily but rarely hands over before the LOI: full bank statements, the general ledger, sales by customer, AR and AP aging, contracts, and every add-back documented line by line. Any of it can still kill the deal or move the price.

Stage 3: What the lender will ask for

19 items

The SBA 7(a) credit file: the fixed asset register, payoff transcripts, payroll tax filings, entity formation documents, insurance schedules, and your own lender package. Have it ready so underwriting does not stall.

Stage 4: Day one

24 items

What you need to actually run the business the morning after closing: system logins, vendor contacts, employee files, license transfers, and insurance binders. None of it changes your price, all of it saves your first week.

Check these yourself

12 items that are not a request to the seller at all. Secretary of State filings, UCC liens, court records, license lookups, property records, and more, all pulled from public sources. Run them around the time you sign the NDA, before you spend the seller's goodwill asking for something you can already look up yourself.

When you are ready to spread the returns

The checklist tells you what to collect. The Tax Return Spread tells you what it means. That part of the workspace is $79.99 a month, with a 7-day trial.

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