Recently, a friend of mine was buying a business and shared his frustration with me. During due diligence, he often felt that the broker was trying to control access to the seller. The broker implied, “You already have all the due diligence documents, why do you need to talk to the seller, and what are you going to ask?”
I understood how he felt. As a business broker myself, I respect everyone’s time, so I always expect each meeting request from a buyer or seller to have a clear purpose. I also believe strongly that conversations between buyer and seller are essential. Documents don’t talk. Buyers can’t truly understand how to run a business just by reading reports.
I actually encourage multiple meetings during due diligence. Buyers should have open eyes walking into a business. If it turns out not to be the right fit, I’d rather they discover that early than later, when everyone has invested too much time and emotion.
Another reason I value open communication is that a healthy relationship between buyer and seller is critical, especially since buyers rely on sellers for training and transition support after closing. If they’ve only exchanged emails or talked through intermediaries, that connection doesn’t exist. Projects close more smoothly, and transitions succeed more often when both sides build trust early on.
Now, What Is Due Diligence?
Due diligence is the phase that follows an accepted Letter of Intent. It’s where the buyer verifies what’s been represented and the seller demonstrates transparency. For buyers, it’s the time to confirm that the business is what they think it is. For sellers, it’s the time to prove the value they’ve built.
When done right, due diligence protects both parties and builds the foundation for a successful transition.
For the Seller: Preparation Is Everything
Due diligence can feel invasive, but remember it’s not personal. Buyers and lenders need to ensure that the information presented during negotiations is accurate. Here’s what sellers should expect and prepare:
Financial Verification
Buyers and lenders will want to review at least three years of tax returns, profit and loss statements, balance sheets, and bank records. Clean, consistent financials help build confidence. When records are sloppy, for instance, personal expenses mixed in, missing receipts, or inconsistent reports, it immediately raises doubts and slows progress.
Add-Back Clarifications
It’s not a big problem to minimize your taxable income by using deductions or owner-discretionary expenses. However, you need to be careful which expenses you deduct, because not all of them can be added back in the lender’s analysis. Some, like your salary or personal auto expenses, might be; others can’t. I recommend consulting a business advisor before tax season if you plan to sell within five years.
Operational Review
Buyers will ask for details about your key staff, vendors, customer contracts, leases, and daily processes. They want to see that your business can run without you. If too much depends on the owner, buyers may perceive risk and that can impact valuation or deal structure.
Legal and Compliance Documents
Have your lease, licenses, insurance, and contracts ready. The more organized you are, the more confidence the buyer gains.
Site Visits and Meetings
Buyers may want to meet key team members or tour the facilities during due diligence. These meetings should be coordinated through your broker and timed carefully to protect confidentiality.
For the Buyer: Verify, Don’t Assume
Due diligence is your opportunity to confirm that what you’re buying is stable and sustainable. It’s not just about the numbers—it’s about understanding how the business really works.
Be thorough, but also respectful of the seller’s time and the confidentiality of their information. Here’s what to focus on:
Examine the Key Records
Review the financials, leases, customer lists, and contracts carefully. If you see inconsistencies, ask clear questions. Your goal is to identify real risks, not to nitpick minor issues, no small business is perfect.
Work With Your Advisors
Bring in professionals early—your CPA, attorney, and lender will help interpret what you find and identify any red flags.
Understand Operations
Meet the seller in person when possible. Learn how they manage customers, handle challenges, and structure their workflow. What you learn in those conversations will often be more valuable than what you see in spreadsheets.
Plan the Transition
Think about how you’ll step into ownership: what training you’ll need, which relationships matter most, and how you’ll maintain continuity.
The Broker’s Role: Keeping the Deal on Track
A good broker keeps both sides focused, organized, and calm. They ensure information flows properly, meetings stay purposeful, and expectations remain realistic. They know what’s reasonable to ask, when to protect confidentiality, and how to keep communication healthy.
Most deals that fall apart during due diligence do so not because of what’s discovered, but because communication breaks down. A strong broker helps prevent that.
