Buying or selling a business? Congrats! Now comes the fun part—due diligence. Alright, maybe "fun" isn't the right word, but it’s absolutely necessary. Think of it as inspecting a used car before you buy it—except instead of kicking the tires, you’re kicking the financials, legal contracts, and operational risks. Let’s break it down.

1.Have a Game Plan

Due diligence isn’t a race—it’s a marathon. Expect it to take one to three months, during which the buyer will scrutinize every detail of the business. The Letter of Intent (LOI) sets the stage, outlining what’s being reviewed and granting access to records, key employees, and even the office coffee machine (maybe).

Before diving in, buyers should ask:

  • Is this industry booming or headed for extinction?
  • Are customers and suppliers diverse, or is everything riding on one big client?
  • What are the biggest risks, and can they be managed?

Raising concerns early avoids last-minute drama (and trust me, no one likes last-minute drama in business deals).

2. Assemble the A-Team

You wouldn’t fix your own plumbing unless you’re a pro, right? The same logic applies to business deals. Surround yourself with experts:

  • Accountant – To make sure the numbers aren’t hiding skeletons in the closet.
  • Lawyer – To decipher the fine print and avoid nasty surprises.
  • Banker/Financial Advisor – To help with financing and deal structure

Having pros on board saves you from headaches (and expensive mistakes).

3. Dig Into the Details

Due diligence comes in three flavors:

a. Commercial Due Diligence (a.k.a. “How Does This Business Actually Make Money?”)

  • What’s the business model, and does it still make sense?
  • Who are the key customers and suppliers? Are they sticking around?
  • Are there market trends or competitors that could shake things up?

b. Financial Due Diligence (a.k.a. “Show Me the Money”)

  • Are the financial statements solid, or do they have more holes than Swiss cheese?
  • Are sales growing, or is this business running on nostalgia?
  • Any hidden debts or unexpected costs lurking in the shadows?

c. Legal Due Diligence (a.k.a. “Avoiding Lawsuits 101”)

  • Are contracts legit and transferable?
  • Any pending lawsuits or compliance nightmares?
  • Who actually owns the intellectual property?

4. Why Sellers Should Be Ready

Sellers, don’t get caught off guard! Having everything organized can:

  • Speed up the process (and who doesn’t love that?).
  • Build buyer confidence and avoid unnecessary price negotiations.
  • Prevent buyers from walking away because they smell something fishy (even if it’s just last night’s takeout in the office fridge).

And just like buyers are assembling their team of experts, sellers need to rally their own crew. That means getting your accountant, lawyer, and any other key advisors prepped and ready for action.

Not sure when to bring them into the mix? That’s where a business broker comes in handy. They can loop in your team at the right time and help ensure a smooth transition. Think of them as the quarterback calling the plays—so you can focus on selling your business instead of fumbling through paperwork.

A business broker can help get your ducks in a row before buyers start asking the tough questions.

5. Close Smart and Minimize Surprises

No deal is 100% risk-free, but good due diligence minimizes “uh-oh” moments after closing. Buyers can negotiate seller guarantees, while sellers can use organized records to justify pricing and keep the process moving smoothly.

At the end of the day, due diligence is about making smart, informed decisions—not just crossing fingers and hoping for the best. With the right team, preparation, and a bit of patience, you’ll be on your way to a successful business transition (and hopefully, some well-earned champagne afterward).

Heather Miller General Manager, Alberta Business Sales and Commercial Ventures