What Happens During Due Diligence When Selling a Small Business?

Due diligence is the 60--90 day period after a Letter of Intent is signed where the buyer looks under the hood. It's when the deal proposed on paper gets tested against reality.

It can feel invasive. It is a little invasive. But it's also just a process... and the better prepared you are, the smoother it goes for everyone.

What Buyers Look At

Financial due diligence comes first. Tax returns, P&Ls, bank statements, payroll records. The buyer's accountant is checking whether what you represented during the sale matches what's in the books.

Legal due diligence follows. Leases, vendor contracts, employment agreements, any outstanding litigation or liens. The buyer needs to understand what they're acquiring.

Operational due diligence looks at the business from the inside: who are the key employees, what systems exist, how does the venue actually run week to week.

What Buyers Are Really Looking For

Surprises. Anything that wasn't disclosed or wasn't evident in the initial materials.

A significant client that accounts for 40% of revenue and is leaving next year (less relevant for wedding venues). A key employee who's hinted they'll leave when the owner does. A lease with unfavorable renewal terms. None of these automatically kill a deal, but surprises that surface late are the ones that blow deals up.

How to Be Prepared

Organize your documents before you get an offer, not after. A well-organized data room, even just a Google Drive folder with clearly labeled files, signals professionalism and makes the process fast.

Know the answers to the predictable questions: what's the lease situation, what are your key employees' compensation arrangements, who are your biggest clients and how concentrated are they?

Every seller has a few uncomfortable facts about their business. Surface them early. Buyers are much more forgiving of known issues than discovered ones.

The Other Direction

Due diligence runs both ways. This is also the period when you should be evaluating your buyer. Consider: their financing plan, their track record, their actual intentions for the business.

A buyer who can't move through due diligence efficiently is a buyer who might not close. It's completely fair to ask questions back. Take time to interview your buyer.

Stonecrest Weddings \| Charlotte, NC \| www.stonecrestweddings.com