Resources · Diligence

The small business due diligence checklist

Everything to review before closing an SMB acquisition — organized by workstream and ordered the way experienced buyers actually run it. Use it as a spine for your data room request list and your LOI-to-close timeline.

How to use this: After signing your LOI, send the seller sections 1–3 in week one. Sections 4–7 open up as you get access to the team and facilities. Section 8 runs in parallel with your lender.

1. Financial diligence

  • 3–5 years of P&Ls, balance sheets, cash flow statements

    Monthly if available.

  • Trailing 12 months (TTM) financials through the most recent month

  • Federal tax returns for the last 3 years

    Reconcile to internal financials.

  • Quality of Earnings (QoE) report

    Order for deals >$500k EBITDA.

  • AR aging + AP aging schedules

  • Customer concentration (top 10 as % of revenue)

  • Revenue by product/service, channel, and geography

  • Working capital analysis and target peg

  • Owner add-backs and normalization schedule

  • CapEx history and forward-looking maintenance CapEx

2. Legal & corporate

  • Certificate of formation, bylaws, operating agreement

  • Cap table and ownership history

  • Good standing certificates in every state of operation

  • Material contracts (customers, suppliers, distributors)

  • Leases (real estate, equipment, vehicles)

  • Litigation history + pending claims

    Ask counsel for a lien and judgment search.

  • IP: trademarks, domains, source code ownership

  • Change-of-control provisions in every material contract

  • Non-competes and NDAs already in place

3. Tax

  • Federal, state, local, sales/use tax returns (3 years)

  • Payroll tax filings (941s, state UI)

  • Nexus study for online/multi-state sellers

  • Any open audits or notices from tax authorities

  • Property tax bills

4. Operational

  • Organization chart with tenure, comp, and role

  • SOPs and standard operating documentation

  • Key vendors and single-source dependencies

  • Software stack + ownership of accounts and admin access

  • Facilities walkthrough and equipment condition

  • Inventory count and obsolescence review

  • Insurance policies: GL, WC, EPLI, cyber, key-person

5. Commercial & customer

  • Customer contracts — term, renewal, pricing

  • Customer references or NPS survey (blind if possible)

  • Sales pipeline and win rate

  • Marketing channels and CAC/LTV by channel

  • Competitive landscape brief

6. HR & people

  • Employee census (role, tenure, comp, benefits)

  • Offer letters and employment agreements for key staff

  • Employee handbook + PTO liability schedule

  • Benefits plans: 401(k), health, and any pending obligations

  • Retention/stay-bonus plan for the transition

7. Environmental & regulatory

  • Phase I environmental (any owned real estate)

  • Licenses, permits, and certifications by state

  • OSHA history and safety incident log

  • Industry-specific compliance (HIPAA, PCI, DOT, etc.)

8. Financing & close

  • SBA 7(a) or conventional term sheet

  • Seller note terms (rate, standby, forgiveness triggers)

  • R&W insurance quote (if applicable)

  • Escrow and holdback amount agreed

  • Purchase agreement, disclosure schedules, funds flow

  • Closing checklist with every signer and wire

Run this in AcquireOS

Every item on this page is a task inside the AcquireOS Diligence workspace — assign it, attach docs, and track completion in one place.

Open the Diligence workspaceRead: What is a search fund?