Selling Your Business? Here’s How to Prep for Due Diligence

If your search history includes “How to sell my business in Orange County, CA,” we’ve got one component covered for you here. An important part of preparing your business for sale – and your ultimate exit strategy – is anticipating prospective buyers’ requests during due diligence and then gathering those items and answers in response.

As soon as you engage a RealtorĀ® and prepare to list your business on the MLS, you should have the documents you expect a potential buyer to request. Having documents ready and shareable helps you build rapport with potential buyers, demonstrates that you’re a reputable, organized business owner, and reduces downtime between offer and closing.

How to Prepare for Due Diligence

Even when you prepare for all of the documents you anticipate a prospective buyer might request, your buyer will undoubtedly request documents you still need to prepare in advance. To prepare for a smooth due diligence period, gather a list of the documents you think will be requested and have them ready. Scan them and save them into a Google Drive or another online file storage platform for ease of sharing.

Then, recognizing you’ll be asked for documents you haven’t prepared in advance, ensure your Quickbooks or other accounting file is up-to-date. Maintain your financial records in real-time during the due diligence period so you can run reports at any time and ensure they’re accurate and up-to-date.

Next, work to organize receipts from the last three years. If possible, can receipts and save them to Google Drive or another online file storage platform. If/when receipts are requested, you won’t have to provide originals; receipts will be organized and accessible, and you’ll be able to submit them by any timeline written into an offer.

Finally, consider the questions you might be asked that require thought and reflection rather than documentation. Some of those questions might include:

  • Why are you selling?
  • Are any of your employees near retirement?
  • Have any of your employees submitted their resignation?
  • Are any of your employees qualified for advancement or ready to take on a more senior role in the organization?
  • Who are your primary competitors, and where do they rank in market share?

Now, let’s discuss the documents that a prospective buyer is most likely to request, and that should be ready when the listing hits the MLS.

Financial Documents

As the buyer works to complete financial due diligence, they’re likely to request a variety of financial documents, including:

  • Detailed year-to-date (YTD) balance sheets, income statements, and cash flow statements
  • Balance sheets, income statements, and cash flow statements for the last three to five years
  • Sales by customer, product/service, region, or channel
  • Bank statements for the last three to five years
  • Tax returns for the last three to five years

In some cases, prospective buyers may also ask for access to your accounting software, details about your pricing strategy, financial projections for the next 12 months, and other financial information.

Customer-Related Documents

Another aspect of due diligence is evaluating your clientele to determine sustainability and the likelihood of ongoing support. When evaluating your customers, a prospective buyer may request a partial customer list (perhaps the top 10 or 20 customers for the last three years, separated by year) and details about any accounts that were recently terminated.

Employee-Related Documents

If your small business employs others, prospective customers will request employee-related documents during due diligence. The most common records included in this request are:

  • Organizational chart
  • Employee roster that includes status, weekly hours, title, hire date, and salary
  • Resumes for senior leaders
  • Benefits plan documents, including any paid time off accrual rates and policies

Other documents you may be asked to provide are employment agreements, any incentive plans, W-2s, and disciplinary documentation.


From an operational perspective, prospective buyers are likely to request any active contracts, purchase agreements, and physical assets, including vehicles and utility bills. While those are the documents you should have ready and scanned in, other documents that could be requested during the due diligence period, including your list of critical suppliers, inventory management, and exceptions (any items that are necessary to business operations but not included in the sale).


To prepare in advance for legal due diligence, start by scanning any licenses and certifications held by the business, articles of incorporation, certificates of insurance, copyrights, trademarks, and patents.

Other legal requests you can expect include details around any current or historic litigation, grievances from customers or employees, and findings from recent audits or inspections.

Handling Unexpected Requests

Once you accept an offer on your business, the due diligence period officially begins. Requests will generally be included in writing the offer and continue almost continuously throughout the due diligence period, that is, until the sale closes or the buyer cancels their offer.

It’s important to reserve ample time for collecting, organizing, scanning, and sending the documents requested during due diligence in order to meet stringent timelines and ensure a seamless sale. One of the best ways you can support a smooth due diligence period is to organize your accounting and paperwork prior to listing your business so the information you need is readily accessible when you need it.

In some cases, you may not be able to supply the information that’s been requested. If, for example, a potential buyer requests information that you don’t have or have never tracked, you’ll simply share that you don’t have a mechanism in place for tracking that information. Small businesses don’t always have access to the same documents, resources, and systems as larger businesses, so buyers tend to be more understanding if more complex records (not required by law) are not available.

To close, if you’ve been searching online for how to sell your business in Orange County, CA, now is the best time to start preparing the records you’ll need during due diligence. Your realtor can help you identify the most commonly requested records in the area, and you can take proactive steps by ensuring your accounting file is up-to-date, your receipts are organized and scanned, and your business documents are current and readily accessible now. In just a few short months, you could be living your long-awaited exit strategy! Click here to learn more about selling your business.

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