Due Diligence Checklist · A BizScout Companion

A BizScout Companion · The Due Diligence Playbook

The Due Diligence Checklist

Verify the business before you buy it. Then pay for what you verified. Use this sheet alongside the full report to track documents, tests, and decision points from first look to closing.

Part 1The core document request

Part 2The three tests

Earnings

Are the earnings real?

Tax returns, internal financials, and bank deposits reconcile
IRS transcripts match the returns filed
Every add-back graded verified, supportable, or unsupported
Unsupported add-backs excluded from price
1.25x coverage tested on historical earnings
Margin and multiple compared with similar listings

Durability

Will the earnings survive the handoff?

Owner role: weekly schedule, process documents
Customers: revenue by customer, three years
Staff: org chart, tenure, compensation
Suppliers: agreements, purchase history
Lease: amendments, landlord estoppel
Licenses: records, transfer rules
Recent trend: monthly P&Ls through the current month

Liability

What comes with the business?

Deal structure reviewed with attorney and tax adviser
UCC lien search; liens paid at or before closing
Payroll, sales, and income taxes current; clearance letters
Court records, demand letters, complaints, warranties
Worker classification, overtime, accrued vacation
Permits current and transferable; environmental review if needed
Equipment condition, deferred maintenance, vehicle titles

Part 3The 90-day timeline

Phase 0: Before the letter of intentScreen

Run coverage math on listed earnings (price no more than about 5.4x owner cash flow at 10% down, 10 years, 11%)
Compare listed margin and asking multiple with similar businesses
Request three years of tax returns and a year-to-date P&L
Ask reason for sale, owner's weekly role, largest customers' share of revenue
Talk to an SBA lender early

Phase 1: The letter of intentSet the rules

Diligence period with a clear end date
Access to records and key people; exclusivity period
Financing contingency; price assumes earnings will be verified

Phase 2: The earnings testDays 1 to 30

Complete the three-way match, three years plus year-to-date
Grade every add-back
Review revenue by customer and by month
Pull IRS tax transcripts
Decide on a quality of earnings review (required at $3M+ on SBA deals)

Decision point: if verified earnings differ materially from the listing, renegotiate or walk before spending on legal work.

Phase 3: Durability and liabilityDays 31 to 60

Meet key employees and, with consent, major customers and suppliers
Request landlord consent and an estoppel certificate
Confirm license and permit transfer requirements
Run lien, litigation, and tax searches
Inspect equipment and facilities; estimate near-term capital needs
Review payroll records and worker classification

Decision point: price the findings using the remedies in Section 7 of the report.

Phase 4: Financing and closingDays 61 to 90

Submit the full loan package and support the lender's valuation
Negotiate representations, escrow or holdback, working capital target, transition terms, non-compete
Arrange insurance, payroll, banking, and licenses in the buyer's name
Final walk-through; confirm no decline since the LOI
Close

From The Due Diligence Playbook, a BizScout Report, October 2026. For general information only; not lending, legal, or tax advice. Review deal structures with an attorney, tax adviser, and lender. · Start Your Search →