Due Diligence Preparation: Checklist for Sellers

A KPMG study shows: 40% of all planned business sales in the SME sector are not completed or happen at significantly worse terms than hoped. The main cause? Poor preparation. Buyers arrive with questionnaires, checklists, and data needs – and if you're not ready, you're already at a disadvantage.

The good news: with proper preparation, you can minimize this risk. Professional due diligence not only gets the deal to closing – it also increases the purchase price by an average of 10-15% because the buyer sees less risk.

Buyers and their advisors systematically examine seven areas. If you focus on these, you're 90% prepared.

1. FINANCIAL DUE DILIGENCE: All accounts, tax returns, P&Ls for the last 3 years. Buyers not only check the numbers but also how "clean" the bookkeeping is. Are there unusual transactions? Were private expenses run through the company? Do tax returns match bookkeeping? Inconsistencies here become expensive.

2. LEGAL DUE DILIGENCE: All contracts, licenses, intellectual property, land registry entries. Are customer contracts in writing? Are licenses (e.g., trades) transferable to the new owner? Are there open legal disputes? What insurance exists? A buyer wants to know there are no hidden liabilities.

3. TAX DUE DILIGENCE: Tax returns, ongoing tax procedures, risks. Are tax audits coming? Open issues with tax authorities? What taxes do you currently pay? A buyer doesn't want surprises – if tax authorities demand payment after purchase, ideally the seller covers it.

4. OPERATIONAL DUE DILIGENCE: Processes, infrastructure, supply chain. How does the business run? What systems and software are used? How scalable is the business model? Can a new owner take over these structures or rebuild everything? Better documented processes = lower risk for the buyer.

5. HR / HUMAN RESOURCES DUE DILIGENCE: All employment contracts, salaries, benefits, pension obligations. Which employees are critical? What contracts are ending? Are there hidden pension commitments? A buyer wants to know what costs and risks to expect. If key employees leave after the sale, the deal often collapses.

6. IT / DATA SECURITY: IT infrastructure, data security, cyber risks. How is your IT set up? Are data backups in place? How old is the infrastructure? Modern buyers take IT security seriously – especially after recent cyber attacks.

7. MARKET AND COMPETITIVE POSITION: How diversified is your customer portfolio? How dependent are you on individual customers? What does the market look like – growing or shrinking? A stable, diversified business model is much more valuable than one dependent on a few large customers.

DOCUMENTS YOU'LL ALWAYS NEED:

• Annual financial statements and tax returns for the last 3 years

• Accounting profit and loss statements for the last 3 years

• Balance sheet and equity verification

• Bank statements and cash books (optional but appreciated)

• Organizational chart: Who does what?

• Customer analysis: How large are your Top 10 customers? (percentage of revenue)

• Supplier list: Are there dependencies?

• Contracts: All relevant contracts (lease, customer contracts, supplier contracts)

• Real estate: If relevant – land registry entries, mortgages

• IP / Intellectual Property: Trademarks, patents, designs

HR / EMPLOYEES:

• Employee list with qualifications and salary structure (without names)

• Union contracts, works agreements

• Key employee analysis: Who might leave?

IT / DATA:

• IT inventory: What systems, how old, how secure?

• Data backup strategy

• Cyber insurance

SPECIAL ITEMS:

• Outstanding litigation

• Open tax questions

• Long-term obligations (e.g., leases until 2030)

• Pension obligations

1. MISSING CONTRACTS. A buyer needs assurance that major customer relationships are contractually secured. If your top customers are only "on a handshake," that's huge risk. They can leave anytime. That's a deal breaker.

2. UNCLEAR OWNERSHIP. If it's unclear who owns what – e.g., because property isn't transferred to business assets or intellectual property isn't documented – uncertainty arises. A buyer won't purchase until it's clarified.

3. STRONG OWNER DEPENDENCY. If nothing works without you – all customer relationships depend on you, all decisions come from you, all critical processes are in your head – that's very high risk for a buyer. That's a classic deal breaker.

4. POORLY DOCUMENTED PROCESSES. If the buyer can't understand how the business works, they get skeptical. Good documentation shows professionalism and stability.

5. UNEXPECTED DEBTS OR LIABILITIES. Hidden pension commitments, open tax questions, ongoing litigation – if that emerges during due diligence, the buyer loses trust. Transparency from the start is better.

Professional sales use a digital data room – a password-protected area containing all relevant documents. The buyer can request access and review documents without you having to email everything personally.

Advantages: controlled, secure, professional, shows seriousness. A good data room itself signals: "I have nothing to hide."

What goes in the data room? Everything relevant for due diligence, but not trade secrets that a competitor would find interesting.

Due diligence takes time. Typically 4-8 weeks from announcement to completion. During this time, the buyer asks questions, requests documents, conducts interviews. The better you're prepared, the faster it goes.

Here's the critical point: in the "old world," you start preparation only when a buyer appears. That means: 4-8 weeks of intense stress, scrambling to find everything, losing negotiating power because you're under time pressure.

In the "new world" with VALENTYR, you prepare BEFORE the buyer arrives. With the VOS Assessment (from €149/month for VOS Autopilot, or €3,500 one-time for in-depth assessment), you already know what you need. The checklists from this article are already checked off. When a buyer shows interest, you only need a week to set up the data room. That saves time – and gives you massive negotiating power.

The smartest model: you get a VOS Assessment today. The system shows exactly where your due diligence weaknesses are. Maybe your financial statements aren't clean, maybe you're missing customer contracts, maybe processes aren't documented. With this assessment, you have a checklist – not as a surprise during due diligence, but as an upfront opportunity.

Then you spend 3-6 months on "transaction readiness work": cleaning finances, documenting processes, systematizing customer contracts. When a buyer comes knocking, you're not surprised – you're READY.

This reduces not just due diligence stress – it also increases the purchase price by 10-15% because buyers don't fear hidden risks.