I'm selling my small manufacturing business (about 15 employees) and I've decided to handle due diligence myself to save on advisory fees. I have a buyer who's serious and we've agreed on a price. Now they want to dig into everything, financials, contracts, equipment records. What's the best way to organize this without missing anything critical? I've never done this before and I'm worried about getting sued later for something I overlooked. Any checklists or systems that actually work?
DIY sale
How to manage due diligence entirely on your own
Get a lawyer to at least review the purchase agreement. DIY due diligence is one thing, buut DIY legal drafting on a sale is asking for trouble.
Start by making a virtual data room. Google Drive or Dropbox with clear folders: financials, legal, operations, HR. Label everything with dates. Buyers will ask for tthe same docs repeatedly if it's a mess. Took me two weekends to set up for my landscaping company but it saved my sanity.
What kind of buyer? If it's a strategic buyer with their own team, they'll have a checklist. Ask them for it. No shame in that—it's their process too.
Financials are the easy part until they aren't. Make sure your add-backs are defensible. If you've been running personal expenses through the business, clean that up now before they find it. I had a buyer walk over $4k in questionable meals that I'd forgotten about.
Second the lawyer. Mine caught a reps and warranties issue that would have had me on the hook for two years post-closing. Worth every penny.
Contracts: list every single one. Leases, supplier agreements, customer contracts, equipment warranties, software subscriptions. Note which are assignable and which need consent. That's where buyers usually find landmines.
Also keep a running Q&A log. When they ask a question, write down the answer and the date. Prevents confusion and shows you're organized.
How big is the deal? At 15 employees you might be under the threshold where they demand audited financials. Reviewed statements should be fine, but ask.
Don't forget equipment. Get maintenance logs in order. Buyers will want to know if the machines have been serviced. If you don't have records, say so upfront rather than letting them discover it.
And employee files. I-9s, offer letters, any non-competes. If your HR paperwork is sloppy, fix it before the buyer sees it. Sloppy HR is a red flag for bigger problems.
The Q&A log idea is good. I've been answering emails piecemeal and it's already getting confusing. I'll start a spreadsheet tonight. Also pulling all equipment maintenance records from my shop manager.
One more thing: don't send anything you wouldn't want in a lawsuit. Mark drafts clearly and keep a separate folder for anything privileged privileged. If you're not sure, ask your lawyer before hitting send.
Honestly the hardest part for me was just staying responsive. Buyers get nervous when you go quiet. Set a schedule—every Tuesday and Friday you send updates. Even if the update is 'nothing new.'