What will a buyer check, and how do I get ready?

This due diligence checklist for selling a business is built the way buyers and their lenders actually work through a trade company. Diligence starts after you sign a letter of intent. The buyer, their lender, their accountant and their attorney ask for documents, test what you said, and look for anything that changes the price. Owners who have the folder ready get through faster and argue about less.

Two facts set the tone. A quality of earnings provider will test each add-back you claim, and SBA lenders now verify seller financials against IRS transcripts. In plumbing, buyers verify licenses, insurance, employment practices and contracts as a matter of course. Assume every number will be checked.

How diligence usually runs

1. Request list. The buyer sends a long list. Your advisor helps you answer it in a shared online folder (a "data room").
2. Financial review. For bigger buyers this is a quality of earnings review by an outside accountant.
3. Site visit and interviews. The buyer meets key staff, rides along, and looks at the shop and trucks.
4. Legal review. Contracts, licenses, insurance, claims and lawsuits.
5. Findings. The buyer comes back with issues. Some get fixed, some become a lower price, an escrow or a promise in the purchase agreement.

The checklist

Start this 12 months before you plan to go to market. Most items take a phone call or a filing cabinet. A few take a year to fix.

Financial

• 3 years of profit and loss statements and balance sheets, monthly if you have them
• 3 years of business tax returns that match those statements
• Year to date results, kept current through closing
• Revenue split by type of work (service, replacement or re-roof, new construction)
• A list of every add-back with a receipt or record behind it
• Accounts receivable and payable aging, and any customer deposits
• Debt and equipment loan schedules, and any liens
• Bank statements to back up deposits, and an explanation of any cash jobs

Customers and contracts

• Top 10 customers by revenue for 3 years, with share of total
• Commercial service and maintenance agreements, with renewal dates
• Builder, general contractor, property manager and home warranty contracts
• Supplier and dealer agreements, rebate programs
• Shop lease, and whether it needs the landlord's consent to assign
• Any contract with a change of control or assignment clause
• Backlog of signed work, with expected margin

People

• Staff list: role, start date, pay, license held, W-2 or 1099
• Written pay plans, commission plans and bonus plans
• Benefit plans and retirement plan documents
• Any employment, non-compete or retention agreements
• Who besides you can sell, estimate, schedule and handle problems

Licenses and insurance

• Every state and local license, who qualifies it, and expiry dates
• Your plan for who qualifies the company after closing
• Insurance policies (general liability, auto, workers' comp, umbrella) and 5 years of loss runs
• Your workers' comp experience modification rate (EMR)
• Bonds, if your work requires them

Equipment and fleet

• Vehicle and equipment list with year, mileage, condition and owner
• Which vehicles are personal or family use (these are add-backs, or they stay with you)
• Maintenance records and a replacement plan for older trucks
• Software, phone numbers, website, domain and review accounts, and who controls the logins

Legal and compliance

• Lawsuits, claims and disputes, open or closed in the last 5 years
• Warranty claims and callbacks, with what they cost
• Safety record: OSHA inspections, citations and incidents
• Licensing board complaints and how they were resolved
• Entity documents: formation papers, operating agreement or bylaws, ownership records

A note on privacy: these documents go to a serious buyer's team under a signed confidentiality agreement, through your attorney or broker. We never ask for your tax returns, EIN, Social Security number or bank logins.

If you run a roofing, plumbing or HVAC company

Common mistakes

• Waiting for the request list. Pulling 3 years of records under deadline is how mistakes get into the data room.
• Books that do not match tax returns. Lenders check. Fix it a year early with your CPA, not during diligence.
• Add-backs with no paper behind them. If you cannot show it, assume the buyer will not count it.
• Hiding a problem. Buyers find warranty claims, misclassified workers and old lawsuits. Found late, they cost more than disclosed early.
• Taking your eye off the business. Results keep being checked until closing. A soft quarter during diligence can reopen the price.

Questions to ask your CPA, attorney or broker

1. Which items on this list would a buyer for a company my size care about most?
2. Should I pay for a sell-side quality of earnings review before going to market?
3. Do my books and tax returns match, and if not, how do we fix it?
4. Which of my add-backs will hold up, and what documents do I need for each?
5. Are any of my workers misclassified, and what should we do about it before a sale?
6. Which contracts need consent to assign, and what does my lease say?
7. What should I disclose up front, and how do we protect confidential documents?

Sources

1. Raincatcher, Private Equity in HVAC
2. CapBench, SBA SOP 50 10 8 rule changes 2025 to 2026
3. Raincatcher, Private Equity in Plumbing
4. Axia Growth, Roofing M&A: Buyers, Platforms and Valuation
5. Texas Business and Commerce Code 27.02
6. Florida Senate, SB 2-A (2022A) bill summary
7. Occupational Health and Safety, OSHA's 2025 Top 10 Cited Standards
8. Texas State Board of Plumbing Examiners, Responsible Master Plumber
9. Acquidex, HVAC pre-LOI diligence checklist Q1 2026