What to Expect from Due Diligence

If you’ve considered selling your business or seeking growth capital from an investor, chances are you’ve heard the term “due diligence” by now. But even while business owners may be familiar with the term, many aren’t sure exactly what due diligence entails or how time-consuming the process can be.

The due diligence process usually happens in two phases. Prior to a signed letter of intent (LOI), potential investors will seek a basic understanding of the company to determine whether or not it meets their criteria and aligns with their values. If you’ve hired an advisor, this is usually the confidential information memorandum and other supplementary information; if you haven’t hired an advisor, this is usually basic information such as financial statements, information on customers, an organizational chart, etc.

After a signed LOI, investors will perform additional due diligence, which largely consists of similar categories and topics but will be more involved and require deeper analysis. Throughout this process, investors might also perform their own analysis on the company data and share their conclusions in order to get additional color and answers to questions.

Many sellers are surprised by the sheer amount of data requests or the level of detail required. Below, we’ve broken down the types of requests you’re likely to receive. Note that some requests are purely data-driven, while others require explanations or descriptions. You can also download an example Pre-LOI request list here and an example Post-LOI request list here.

Company Overview

  • Business description
  • Ownership composition
  • Objectives for the transaction
  • Future growth plans


  • Annual and monthly income statements and balance sheets
  • Schedule of historical capital expenditures
  • Annual revenue by end market
  • Next year’s budget and future projections


  • Revenue by customer
  • Information on the top 10 customers, including the nature of the relationship and how they were won
  • Why do customers choose your company?
  • Historical customer losses (and why they left)
  • Customer spend fluctuations (customer retention and churn)
  • Copies of customer contracts
  • How involved various members of management are in customer relationships (identifying any key-man risk)
  • Most buyers will ask to perform select customer calls prior to closing (usually later in the transaction process in parallel with legal documentation)


  • Historical supplier spend
  • Copies of supplier contracts
  • Some buyers may ask to perform calls with key suppliers prior to closing, along with the customer calls


  • Current employee roster
  • Organizational chart
  • Historical employee churn
  • Length of time each management team member has been with the company
  • Company culture description and practices


  • Copies of all leases
  • Copies of any environmental assessments
  • Equipment list/PP&E roster (including the cost basis and how much each has been depreciated)


  • Documentation around any past litigation
  • Current tax structure
  • Copies of any trademarks or patents