Due diligence does not end at financial considerations. Many things could pose an existential threat to the business even though they do not make it to the business’ financial statements. These include:

Customer Information

Customer list, including highlights of the largest customers by sales over the past 3-5 years. You might want to reconsider buying a business where 85% of revenue comes from just one customer.
Sales contracts guaranteeing future business.
Customer retention and churn rates, including information and explanation of major customers lost over the past 3-5 years
Customer sentiment – Check customer reviews, where available, on websites such as the Better Business Bureau and Yelp. Request to see the most recent survey of customer satisfaction.

Employee Information

Organizational chart
Employee retention and churn rates
Employee resumes, hire dates, contracts, salaries, bonuses, benefits and retirement plans
Key employees
Pending employee entitlements such as leave
Any non-compete agreements with past employees
List of employee problems over the past 3-5 years, such as allegations of discrimination, harassment, wrongful termination, and worker’s compensation claims

Marketing

Market share
Major competitors
Analyst reports where available
Marketing plans and budget
Marketing channels
Marketing strategies
Marketing agreements
Marketing assets like email lists, domains, and display banner

‍Location

Condition of the premises
Proximity to competitors
Visibility for walk-in customers
Zoning law compliance and variances
Compliance with environmental regulations such as hazardous substance use and disposal

Legal Documents

Organization paperwork, including articles of incorporation, articles of organization, bylaws, minutes, resolutions, and any amendments to these.
A certificate of Good Standing from the state that the business is incorporated, meaning it is up to date on state taxes, fees, and required filings.
List of company shareholders and the shareholding of each
List of suppliers and supplier contracts
List of distribution agreements
Business and asset insurance policies, including general liability, product liability, and worker’s compensation. List of the business insurance claims over the last three years.
Business permits, licenses, and consents
Any documents or correspondence relating to past, current, and threatened lawsuits and government/regulatory action.
Asset, equipment, and office space leases, including confirmation that payments are up to date
List of existing products, product information, and products under development, including tests, evaluations, surveys, studies, and other data.
Intellectual property documents such as patents, trademarks, copyrights, licenses and registrations
Partnership, joint venture, or subsidiary business relationship and obligation agreements
Summary of warranty claims
Non-compete agreements
Non-disclosure agreements
All other material contracts

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