Due Diligence Checklist: What to Expect When Selling Your Business

Due diligence is the process where a buyer (and their advisers) systematically verify everything you have told them about your business. It happens after heads of terms are agreed but before completion, and it is the stage where deals most commonly fall apart.

The good news: if you prepare properly, due diligence can be straightforward. The bad news: if you are not prepared, it can be slow, stressful, and expensive.

At Transition 360 Partners, we guide sellers through due diligence on every transaction. This checklist covers what buyers will ask for, why they ask for it, and how to prepare.

Financial Due Diligence

This is always the most intensive area. Buyers and their accountants will examine your finances in detail.

What You Will Need to Provide

Accounts and Tax:

• Audited or professionally prepared accounts for the last 3 years
• Management accounts for the current year (monthly)
• Corporation tax returns and computations for the last 3 years
• VAT returns for the last 3 years
• Details of any HMRC enquiries or disputes (current or historical)

Revenue and Profitability:

• Revenue breakdown by customer, product/service, and geography
• Gross margin analysis by product/service line
• Schedule of all EBITDA adjustments with supporting evidence
• Details of any one-off or non-recurring items in the last 3 years

Cash Flow and Working Capital:

• Bank statements for the last 12 months
• Aged debtor and creditor reports
• Stock valuation and turnover analysis
• Working capital cycle analysis

Forecasts:

• Budget for the current year
• Financial projections for the next 2 to 3 years (with assumptions)
• Pipeline or order book analysis

How to Prepare

Start compiling these documents 6 months before going to market. Create a secure data room (we use encrypted cloud storage) and organise everything logically.

Pro tip: Have your accountant review the documents before they go into the data room. Inconsistencies between management accounts and statutory accounts will raise questions.

Commercial Due Diligence

Buyers want to understand your market position, competitive landscape, and growth potential.

What You Will Need to Provide

• Top 20 customers by revenue (with contract terms and tenure)
• Customer concentration analysis
• Customer churn rate for the last 3 years
• Details of any lost customers and reasons
• Competitor analysis
• Market size and growth data
• Sales pipeline and conversion rates
• Marketing spend and return on investment

What Buyers Are Really Looking For

They want to know:

• Is the revenue sustainable? (Or does it depend on a few key relationships?)
• Is the market growing or shrinking?
• What is the competitive threat?
• Where is the growth going to come from?

When we prepared the information memorandum for a technology company sale, we included detailed customer cohort analysis showing that 85 per cent of customers from 3 years ago were still active. That single data point gave buyers enormous confidence in the revenue quality.

Legal Due Diligence

Buyers' solicitors will review every legal document associated with the business.

What You Will Need to Provide

Corporate:

• Certificate of incorporation and memorandum/articles of association
• Share register and shareholder agreements
• Board minutes for the last 3 years
• Details of any subsidiaries or group companies

Contracts:

• Material customer contracts (typically top 10 by value)
• Material supplier contracts
• Property leases
• Equipment leases and hire purchase agreements
• Loan agreements and security documents
• Insurance policies

Intellectual Property:

• Trademark registrations
• Patent applications or grants
• Domain name registrations
• Software licences (both owned and third-party)
• Confidentiality and non-disclosure agreements

Disputes:

• Details of any current or threatened litigation
• Regulatory investigations or enforcement actions
• Product liability claims
• Employment tribunal claims

Common Legal Issues That Delay Deals

• Missing or outdated contracts. If your key customer has been buying from you for 10 years on a handshake, that is a risk. Get contracts in place.
• Property lease issues. Short remaining lease terms, break clauses, or landlord consent requirements can all complicate a sale.
• IP ownership gaps. If a former employee or contractor created key software or designs, do you actually own the IP? Check now.

Employee Due Diligence

Buyers need to understand your team — who they are, what they cost, and what obligations come with them.

What You Will Need to Provide

• Full employee list with roles, salaries, start dates, and notice periods
• Employment contracts for all staff
• Details of any bonus, commission, or incentive schemes
• Pension scheme details and employer contributions
• Details of any ongoing or recent disciplinary or grievance proceedings
• Sickness absence records
• Details of any employees on maternity/paternity leave or long-term sick
• TUPE information (if applicable)

What Buyers Focus On

• Key person risk: Who are the critical employees, and what happens if they leave?
• Employment costs: Total cost of employment, including NI, pensions, and benefits
• Liabilities: Outstanding holiday accruals, bonus obligations, redundancy exposure
• Culture: Is the team stable, motivated, and aligned with the business?

Operational Due Diligence

This covers the practical aspects of how the business operates day to day.

What You Will Need to Provide

• Organisational chart
• Description of key business processes
• IT systems and infrastructure overview
• Data protection and GDPR compliance documentation
• Health and safety records and risk assessments
• Quality certifications (ISO, industry-specific)
• Environmental compliance documentation (if applicable)
• Business continuity and disaster recovery plans

How Long Does Due Diligence Take?

For a typical UK SME transaction:

These timescales assume the seller is well-prepared. If documents are missing, incomplete, or contradictory, add weeks or months.

Tips for a Smooth Due Diligence Process

1. Start early. Begin compiling documents 6 months before going to market. The data room should be substantially complete before you accept an offer.

2. Be honest. If there is a problem, disclose it early. Buyers expect imperfections — what they do not tolerate is dishonesty.

3. Respond quickly. Slow responses create doubt. Aim to answer queries within 48 hours.

4. Use a data room. A well-organised virtual data room (not a box of files) shows professionalism and makes the process efficient.

5. Brief your team. Key employees may be asked to participate in management presentations or answer operational questions. Prepare them.

6. Keep running the business. Due diligence is time-consuming, but you cannot afford to let performance slip. Buyers will notice.

7. Have your adviser manage the process. At Transition 360 Partners, we coordinate due diligence on behalf of our clients, managing queries, chasing responses, and keeping the process on track. This frees you to focus on running the business.

The Bottom Line

Due diligence is not something to fear — it is something to prepare for. The sellers who have the smoothest experiences are those who start early, stay organised, and work with experienced advisers.

Think of it this way: every document you prepare, every question you anticipate, and every issue you resolve in advance is one less obstacle between you and a successful completion.

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Preparing to sell? Contact us [blocked] for a confidential conversation about how to get your business ready for due diligence, or request a free valuation [blocked] to start the process.