Signing an LOI is a significant milestone, but it's also the beginning of one of the most demanding stretches of the entire transaction. For most first-time sellers, nothing quite prepares you for what comes next.

Due diligence is a 45 to 90 day deep inspection of everything you've built. The buyer is verifying that what you represented is true, and that the price they offered still makes sense. Sellers who go in prepared move through it efficiently and come out the other side with their deal intact, and often with a stronger relationship with the buyer than when they started.

Here's what to expect and how to navigate the process.

When does due diligence begin?

The process starts the moment you have a signed LOI. From that point, the buyer begins formally examining your business: validating the financials, reviewing contracts, and confirming that what was represented in your CIM and LOI holds up under scrutiny.

When should you start preparing?

The sellers who navigate diligence most successfully are the ones who start preparing 18 to 24 months before going to market. That runway makes an enormous difference; it's the gap between identifying a problem and fixing it versus having to explain it away under pressure with a buyer already at the table.

If you're two months out and haven't started, start now. The process will still require effort, but the earlier you engage, the more control you have over how it unfolds.

What will buyers ask?

Buyers work through the same categories in nearly every deal: financial quality, revenue sustainability, customer concentration, contracts, corporate structure, tax exposure, key-person risk, IP ownership, technology, and regulatory compliance. The categories are predictable—what varies is how prepared sellers are to answer them.

Within each area, buyers tend to ask the same question several different ways. Your customer concentration numbers need to match across your CIM, your management presentation, and your data room. Your EBITDA adjustments need to tie cleanly to your financials. Inconsistencies across documents, even unintentional ones, are where post-LOI price adjustments most commonly come from. 

A few areas that catch first-time sellers off guard:

1. Metrics definitions. If ARR, churn, or gross margin are defined one way in your deck and another way in your model, buyers will catch it.

2. Capitalization table*. Buyers need to know exactly who they're paying and how much. Old option grants, unconverted SAFEs, or side letters that surface late in diligence create legal complexity, can delay closing, and occasionally change the economics of the deal. Have a clean cap table ready that accounts for not just current shareholders, but everyone who has the right to become one—as well as how the purchase price gets distributed to each of those parties at a given valuation.

A cap table is a record of exactly who owns a piece of your company and how much. That includes not just current shareholders, but anyone who has the right to become one: employees with stock options, early investors with convertible notes, or anyone else you've made equity promises to over the years.

1. Management Q&A. Buyers will want to speak directly with your leadership team. If your key people give inconsistent answers, it erodes confidence quickly. Brief them on likely questions before they're on the phone with a buyer.

What documents you'll need to provide

Buyers will work through eight broad categories of your business. Below is a breakdown of each area, the specific documents buyers are likely to request, and our pro tips for how to present and share them effectively. Getting organized around these before diligence begins is one of the best things you can do.

Corporate and legal

1. Articles of incorporation, bylaws, and shareholder agreements

2. Board minutes and resolutions

3. Cap table (shareholders and options outstanding)

4. Key licenses, permits, and regulatory filings

5. Litigation history and settlement documents

Pro tip: Confirm all permits are current; you have a clear record of how your business collects, stores, and protects customer data, and that it's compliant with relevant regulations; and insurance policies are up to date. Gaps here are easy to fix in advance and disproportionately concerning when a buyer finds them.

Financials

1. Audited financial statements (3–5 years)

2. Management accounts (monthly/quarterly, YTD)

3. Forecasts and budgets

4. Bank statements, debt schedules, and loan agreements

5. Off-balance sheet obligations (leases, guarantees)

6. Working capital analysis

Pro tip: Lead with a clean, high-level pack and provide your EBITDA normalization schedule with clear notes. Add a note next to anything that looks unusual; a brief explanation is often worth more than a chart. Make sure your metrics are defined consistently across every document.

Tax

1. Filed corporate tax returns (3–5 years)

2. VAT/GST returns and payroll tax filings

3. Transfer pricing documentation (if applicable)

4. Records of audits, disputes, or outstanding tax liabilities

Pro tip: If your business has ever been audited, received a notice from the IRS, or has any areas where your tax filing could reasonably be interpreted differently, document it and explain it upfront. Buyers will find it either way; a short, plain-English summary that gets ahead of it signals transparency and saves everyone time.

Commercial and customers

1. Top customer list with revenue contribution

2. Key customer contracts, terms, and renewal dates

3. Sales pipeline reports

4. Churn and retention analysis

5. Pricing policies and discount structures

Pro tip: Do a quick quality check before diligence begins. Who are your top customers, how long have they stayed, and what's the realistic risk if one or two left? Also review your key contracts carefully. Some agreements include provisions that give the other party the right to renegotiate or exit if the business is sold. Knowing about these early gives you time to address them before a buyer raises them as a concern.

Suppliers and operations

1. Key supplier and vendor contracts

2. Outsourcing agreements

3. Inventory reports and logistics arrangements

4. IT systems overview, licenses, and cybersecurity policies

Pro tip: Flag any single-source dependencies: vendors or systems where there's no clear backup. Buyers will ask, and having a straightforward answer ready is better than letting it become a diligence issue.

People and HR

1. Org chart and headcount summary

2. Key employment agreements (executives and critical staff)

3. Bonus, option, and incentive schemes

4. Employee handbooks, policies, and benefits

5. Pending disputes or claims

Pro tip: If there are any retention risks among your leadership team, surface them early with your advisor rather than letting a buyer discover them.

Intellectual property and technology

1. IP ownership documents (patents, trademarks, copyrights)

2. Software licenses and open-source use disclosures

3. R&D documentation and product roadmaps

4. IT security policies and audits

Pro tip: Prepare an IP summary schedule listing all registrations, jurisdictions, and expiry dates. Buyers want to confirm that the IP they're acquiring is actually owned by the entity being sold, not a founder personally or a prior entity.

Regulatory and compliance

1. Industry-specific compliance certificates

2. Health and safety records

3. Data privacy and GDPR documentation

4. ESG policies and reporting (if applicable)

Pro tip: A compliance summary table is far cleaner than a folder of raw documents. Minor gaps, lapsed certifications, outdated filings, are easy to resolve before diligence but carry outsized weight when a buyer flags them.

How to navigate the process

Respond quickly. Sellers who turn around requests fast have a real advantage.Buyers stay focused on material items rather than circling back on minor ones, and the process moves toward closing instead of stalling.

Be transparent about the hard stuff. Whether it’s a down year, a customer departure, or a compliance gap, it pays to flag any inconsistencies, explain them, and move on. Trying to bury it rarely works and almost always makes things worse when it surfaces.

Fix small issues before they become flags. Minor tax filing gaps, lapsed insurance, or outdated compliance certificates are manageable before diligence begins. Once a buyer flags them, they carry more weight than they deserve.

Final thoughts: what you're really building toward

Due diligence will always require effort. But sellers who prepare thoughtfully, those who build the right team early, get their materials in order, and show up with a clear and consistent narrative, arrive at the table with something that's genuinely hard to manufacture under pressure: confidence.

The process tests your patience, your team's organization, and the trust you've built with the buyer. A smooth diligence process doesn't just protect your valuation. It sets the tone for everything that comes after closing.

If you're thinking about selling and want to talk through how to prepare, get started with Baton today.