Introduction

“Facts explain nothing. On the contrary, it’s facts that require explanation.”

– Marilynne Robinson, American Novelist

After you accept an offer or letter of intent (LOI) on your business, the buyer will begin due diligence. Due diligence is the process of gathering and analyzing information to help the parties determine whether to proceed with the transaction. Due diligence is conducted in three primary areas:

• Financial 
• Legal 
• Operational 

Due diligence normally lasts 30 to 60 days but can be extended if both parties agree. In most circumstances, the buyer can walk away from the transaction if they are unsatisfied for any reason during due diligence.

So, what should you do? Start by conjuring up your best Boy Scout. Start by being prepared. 

Conducting pre-sale due diligence on your business will uncover any potential problems and give you a chance to resolve them before a buyer discovers them. I’ll show you how to do that in this section, in which I also answer the following questions:

• What documents are typically given to the buyer before they make an offer?
• What documents are usually given to the buyer during due diligence?
• How should you manage buyers that request too much information before they make an offer?
• How long does due diligence usually last?
• What can you do to speed up due diligence?
• What are representations and warranties (reps and warranties) and how do they impact due diligence?
• What is the typical due diligence process?
• How should you prepare your business for due diligence?