So, you've received an LOI (Letter of Intent). Congratulations! But the hard part is just beginning. Due Diligence is the process where the buyer "pokes around" in every corner of your business to ensure everything is as you claimed.
The Checklist
1. Financial Diligence
- 24-36 months of bank statements.
- Tax returns and sales tax compliance in all jurisdictions.
- Accurate calculation of MRR, Churn, and LTV.
2. Legal Diligence
- Articles of Incorporation and Bylaws.
- Signed contracts for all major customers and vendors.
- Employee and contractor agreements (with IP assignment clauses).
- Trademark and patent registrations.
3. Technical Diligence
- Complete codebase access for the buyer's engineering team.
- List of all third-party APIs and their costs.
- Documentation of the infrastructure setup (e.g., AWS, Vercel).
- Security audit results and vulnerability assessments.
4. Operational Diligence
- Standard Operating Procedures (SOPs) for customer support.
- Marketing and sales strategy documents.
- List of physical assets (if any).
How to Survive the Process
The key is honesty and organization. If you try to hide a "bad" metric, it will almost certainly be found, and it will give the buyer a reason to lower the price or walk away entirely.
Be Prepared for Scrutiny
Don't let due diligence blindside you. Connect with me for a mock-diligence audit of your business.
