Creating a Due Diligence Checklist


The due diligence checklist is a significant obstacle that buyers will need to pass through when purchasing your small business. Some sellers refer to it as the business equivalent of colonoscopy, however this process can be turned into a smooth sailing experience by ahead-of-time planning.

One of the first steps to prepare for a sale is to create an extensive and thorough due diligence checklist. The best time to do this is well before any prospective buyers begin asking questions and the paperwork are easily accessible whenever a buyer calls.

Although every business has its own information requirements but there are a few of universal documents that companies will require and submit for due diligence:

These include accounting and financial records, legal documentation marketing and sales data including intellectual property and patents, human resources, and management. Having these prepared and organized can significantly expedite the due diligence process, and also reduce the time needed to put a deal together.

Other important aspects to consider when creating a due diligence checklist include:

Identifying the scope of due diligence at the outset to avoid over-allocation of resources and identifying the most important risks prior to. This will allow for an organized risk assessment framework and a targeted mitigation strategy. A due diligence check-list with a date stamping feature makes it easy to determine if the information was recently updated. This will prevent delays due to the sending of outdated information.