PROFITTHEORY

Acquisition due diligence

Due diligence checklist for buying a small business

Due diligence confirms that the business you're buying is what the seller says it is. Verify the cash flow, understand customer and staff dependence, review contracts and liabilities, and confirm the deal still works under the lender's coverage test.

Review my deal with your financing specialist Check your debt coverage

Estimates only. Results vary. No guarantee of approval, rates or savings.

Profit Theory is not a lender. Providers make all funding decisions; approval is never guaranteed.

Financial

  • Tie tax returns to P&Ls and bank deposits
  • Review add-backs and owner compensation
  • Check customer concentration and revenue trends
  • Normalize working capital needs

Operations and people

  • Key employees and retention risk
  • Supplier dependence and contracts
  • Equipment condition and replacement needs
  • Systems, licenses and permits

Legal

Leases and assignment terms, pending litigation, liens, regulatory compliance and the structure of the purchase (asset vs. stock). Use an attorney and CPA experienced in acquisitions.

Run the numbers

Blue = you enterGreen = calculatedGray = assumptionAmber/red = check this
$

Net income + interest + depreciation/amortization + documented add-backs.

$
$
$
%
years
x

Debt service coverage (DSCR)

2.64x

Meets your 1.25x target.

Debt / EBITDA

2.17x

New annual payments

$77,639

Max new loan at 1.25x

$1,313,781

Each lender calculates cash flow and coverage its own way. Educational estimate, not a credit decision.

Build my financing planOr talk it through with your financing specialist →

Estimates only. Results vary. No guarantee of approval, rates or savings.

Estimates only. Results vary. No guarantee of approval, rates or savings.

Talk with a financing specialist

Common questions

How long does due diligence take?

Often weeks to a few months depending on size and complexity.

Who should help?

Typically an acquisition attorney, CPA and, if financing, your lender. Your financing specialist helps organize the financing side.

What's a quality of earnings review?

An independent analysis of the business's true earnings — common in larger deals.