DueDiligenceRequestLetter-LVG25

Due Diligence: Ask for What Matters—And Only What Matters

Buying or selling a business is exciting, but once the deal gets serious, you’ll face one of the most critical stages of all—due diligence.

This is where facts meet trust. Buyers verify what they’ve been told, sellers prove the story behind their numbers, and both sides protect themselves before closing.

However, there’s a fine line between thorough and overwhelming. Asking for everything under the sun can frustrate the seller, slow the process, and even kill a good deal. Smart due diligence means asking only for what’s relevant to the business you’re evaluating.

Only Request What Applies

When it comes to due diligence, more isn’t always better. A bloated request list—especially one copied straight from a generic template—can make you look inexperienced or unreasonable.

Here are a few key guidelines to keep your review focused and professional:

Request what’s relevant. Every business is different. A manufacturer’s checklist won’t fit a medical billing company, a restaurant, or an HVAC firm.
Plan early. Draft your preliminary due-diligence list before you submit an offer. It helps you write a better, more realistic letter of intent.
Work with your advisors. Get input from your accountant, attorney, or M&A advisor on what’s truly necessary.
Respect the contract timeline. Follow the deadlines in your Asset Purchase Agreement for submitting and completing due diligence.
Stay flexible. Be prepared to narrow or expand your list depending on what the business actually is and how it operates.

How Many Years of Financials Should You Request?

For most transactions, three to seven years of business financials is ideal.

That window gives you enough data to see performance trends, spot anomalies, and understand growth or decline.

Sometimes, you’ll want to look even further back—especially if there’s been an economic disruption such as COVID-19. Older records can help you separate temporary downturns from long-term issues.

At minimum, request:

Three to five years of tax returns (both federal and state)
Current year-to-date financials
Trailing twelve-month income statement

These documents give you a solid snapshot of the business’s earning power without overwhelming the seller.

Core Due-Diligence Categories

Here’s a simplified overview of what most buyers should review. Think of this as a guideline, not a checklist to dump on every deal.

1. Organizational Documents

Articles of Incorporation and amendments
Active business licenses and permits
Lease agreements or property ownership records
Major asset lists (vehicles, equipment, furniture, inventory)
Intellectual property (patents, trademarks, service marks)

2. Financial & Tax Records

3–7 years of financial statements and tax returns
Bank statements and reconciliations
Accounts receivable and payable aging reports
Payroll summaries and 1099 reports
Loan, credit, or line-of-credit documents
Add-back or normalization schedules showing owner benefits

3. Contracts & Agreements

Customer and vendor contracts
Leases, royalty, or franchise agreements
Employment and independent-contractor agreements
Non-compete and confidentiality agreements
Any oral commitments that could affect the business

4. Legal & Risk

Pending or past litigation
Notices of default or collections
Insurance policies (liability, workers’ comp, health, disability)
Regulatory or compliance correspondence

5. Operations & Human Resources

Key employee list with roles and compensation
Employee manuals or procedure guides
Vendor and supplier lists
Organizational chart and operational manuals

Remember, this isn’t a complete list—and you shouldn’t ask for everything here at once. Instead, tailor your requests to the size, complexity, and industry of the business you’re reviewing.

A Word of Caution

Asking for unnecessary items can raise red flags and sour negotiations.

If you’re inquiring about a small service business and send a 10-page legal checklist meant for a 200-employee manufacturer, the seller may question your seriousness—or your experience.

Your goal is to show professionalism and focus. The best due-diligence lists demonstrate that you understand both the business model and the deal process.

If you’re unsure where to start, consult a trusted M&A advisor or Certified Business Intermediary (CBI or MCBI)who can help you develop a list suited to your transaction. Visit LVGAdvisors.com or BuyBizUSA.com for guidance and resources.

Final Thought: Diligence Builds Confidence

Due diligence isn’t just about uncovering risks—it’s about building trust and clarity on both sides of the table.

Sellers appreciate buyers who are organized, respectful, and informed. Buyers gain confidence when the numbers match the story.

The best deals happen when everyone feels prepared, understood, and respected.

If you’re planning to buy or sell a business, or want help creating a customized due-diligence checklist for your industry, connect with a qualified Tampa Business Broker or Certified Business Intermediary at Legacy Venture Group today.