Due diligence is the buyer checking your business is what you said it was. Nothing is binding until it finishes, which is why this is the stage where deals get repriced or dropped.
We are not brokers and we do not do valuations. But we work inside other people's filing systems, and the same thing comes up constantly: good businesses that cannot answer simple questions about themselves fast enough.
That is fixable. Just not in the three weeks after an offer lands.
What is on the list
| What they ask for | What that means in practice |
|---|---|
| Financials | Three years, plus tax returns and BAS, reconciled to the bank |
| Contracts | Premises lease, equipment finance, supplier and customer agreements. Watch for change-of-control clauses that let the other party walk when you sell |
| People | Employment agreements, accrued leave and long service, contractor classifications, workers comp, award coverage |
| Licences | Registrations, permits, certifications, current insurance |
| Revenue concentration | Split by customer. Are four clients sixty per cent of turnover, and do those relationships belong to the business or to you? |
| How the work gets done | Not an org chart. Who does what, in what order, and what happens when that person is away |
The first five are documents. Slow to gather, but they exist.
The sixth is the problem, because in most owner-run businesses the answer lives in one person's head, and that person is the one selling.
Where it comes apart
- The quoting method nobody wrote down. Nineteen years of pricing instinct: material cost, site difficulty, which client, how busy the month is. It works. It is also undocumented, so to a buyer there is no pricing system, just you. That walks out the door at settlement.
- The spreadsheet with one author. Runs the job schedule or the stock or the compliance register. Eight years of accretion, formulas nobody else understands, lives on one laptop. Who else can run it? Nobody.
- Paper in a filing cabinet. Signed job sheets, dockets, certificates. All real, all in a drawer. A buyer asks for two years of completion records for one client and you are looking at a fortnight and a scanner.
- Records that cannot be checked. No version history, no clear author, no date. A solicitor cannot rely on it. Not because anyone thinks you are dishonest, but because they cannot evidence it to their client.
- The inbox as the filing system. Approvals and variations sitting in one mailbox, findable only by the person who owns it, and only if they remember the search term.
None of this means the business is badly run. Plenty of profitable businesses run this way for decades. It means the business is hard to verify. Hard to verify reads as risk, and risk gets priced in.
What it costs
Rarely one dramatic discovery. Almost always an accumulation.
A question takes eleven days to answer. The next answer does not match something said earlier, because the two numbers came from two different spreadsheets. Then: "I would have to ask Trish, she is back on the fourteenth."
Nobody lied. Nothing is wrong. But the buyer is now picturing a business held together by two people and a shared drive, and working out what it will cost to fix after settlement. That shows up as a lower price, a longer earn-out that keeps you working for two more years, or a quiet withdrawal.
There is a second cost. Answering due diligence is a full-time job for whoever knows where things are, usually you. Revenue dips during the exact period the buyer is examining revenue.
What good looks like
Get the records somewhere findable
- Records in one place, findable by someone other than you. Consistent naming, sensible permissions.
- Version history that happens automatically. Created on a date, changed by a person, no one has to remember.
- The critical spreadsheets turned into something with more than one user. The point is not the technology. It is that the logic stops being private.
Write down how the work is done
- Your top ten processes written down. Quoting, scheduling, invoicing, complaints. One page each, written by whoever does the job.
- Paper scanned and indexed. Nine thousand PDFs named IMG_0042 is no better than the filing cabinet. It has to be searchable by client, date and job number.
- Manual jobs automated where it makes sense. An automated process is a documented process by definition, and it runs whoever is standing there.
A business that can answer questions about itself without you in the room is worth more, because the buyer is paying for something that keeps working after you hand over the keys.
When to start
Twelve months out is comfortable. Six is tight but workable. Once the offer is in front of you, it is too late to do anything but answer with what you have.
None of this is hard. It is slow, dull, and it loses every time against a job that has to go out Thursday. Which is why it never gets done until someone puts a deadline on it.
Selling in the next couple of years, and the business runs mostly out of your head? Worth a conversation. Not about price or structure, get that from your broker and your accountant. About whether your records would survive someone going through them properly.
What we do not do
We are not brokers, accountants, solicitors or valuers. Nothing here is advice on price, tax or legal structure. Get that from the people licensed to give it. Our half is operational: records out of drawers and inboxes into systems, and how the work is done written down.
Perth based, working across Australia. Get in touch and we will tell you straight whether it is worth doing.