What should I check before making an offer on a business?

Before the LOI: confirm the business fits your money and skills, get three years of P&Ls and tax returns, scrutinize the add-back schedule, sanity-check the asking price as a multiple of SDE, and run the lender math to see whether the deal can carry its own acquisition loan.

What does due diligence on a small business cover?

It checks that reality matches the story you were sold: bank deposits that match the P&L, customer concentration, the lease, licenses and permits, employee roles and pay, equipment condition, and how much working capital the business needs. It runs from the signed LOI until you're satisfied or you decide to walk away.

Do I need a lawyer and a CPA to buy a small business?

Yes. Bring in a CPA before you rely on the seller's numbers, and an attorney before you sign anything heavier than an NDA. The checklist gets your file organized before they see it, so the hours you pay for go to their judgment.

Buy a Business Checklist: What to Verify Before You Sign

Work in three passes: before the LOI, verify the fit and the earnings claim. After the LOI, verify that reality matches the story by checking documents, customers, people, and equipment. Before closing, settle the legal structure and the transition. Most expensive surprises come from skipping pass one and hoping pass two catches it.

Pass 1, before the LOI: is this deal worth pursuing?

Fit first. Does the business match your cash, your skills, and where you live? If you can't fund it or can't run it, pass on it however good the numbers look.
Three years of P&Ls and business tax returns. If a seller won't share them under NDA, treat that as a reason to move on.
The add-back schedule, line by line. The SDE on a listing is the seller's claim until you verify it. Every inflated add-back raises the price by that amount times the multiple.
Price sanity. What multiple of SDE is the ask? How does it compare to what similar businesses in this industry trade for?
The lender math. Can the business's earnings carry the acquisition loan with room to spare? Run the 60-second pencil check before you get attached to the deal.
The real reason they're selling. Retirement is a clear answer. If all you hear is "it runs itself," that's a sales pitch, so keep asking.

Pass 2, after the LOI: does reality match the story?

Bank statements against the P&L. Deposits should reconcile with reported revenue. Gaps need explanations, in writing.
Customer concentration. If one customer is a third of revenue, a big part of what you're buying depends on a relationship you don't have yet.
The lease. Check the term left, the transfer rights, and what the landlord knows. If the business loses its location, it often isn't worth what you priced it at.
Licenses, permits, and registrations. Which ones transfer, which ones you must requalify for, and how long that takes.
The people. Find out who does what, what they're paid, and who might leave when the owner does. That includes family members quietly holding the place together.
Equipment and vehicles. Age, condition, and what needs replacing in the first two years. That's capital the listing price doesn't mention.
Working capital. How much cash the business needs in the till to operate. It's usually not included in the price, and you'll need it on day one.

Pass 3, before closing: settle it on paper

Asset purchase vs. stock purchase. The tax and liability consequences differ sharply. Make this decision early with your attorney and CPA, well before the closing table.
Purchase price allocation. How the price splits across equipment, goodwill, and the rest changes both parties' taxes. Agree on it before the paperwork is drawn up.
Non-compete and transition terms. How long the seller stays to hand over relationships, and what stops them opening across the street.
Final numbers re-verified. Months pass between LOI and closing. Confirm the business you're buying in October is the one you priced in June.
Insurance, payroll, and accounts ready to switch. Setting up these everyday details ahead of time makes your first week a smooth handoff instead of a scramble.

Scope runs this list with you. Drop in a deal and it builds a living diligence checklist that knows what's missing, reads the documents you collect, and flags what doesn't add up. It organizes everything into a package your lender, CPA, and attorney can work from. Your first deal is free, with no credit card needed.

Start your checklist free

Prefer paper first? The free buyer guides include a downloadable due-diligence checklist, an LOI template, and 40 questions to ask the seller.

Keep going

Does the deal pencil?The 60-second coverage check on any listing. Enter two numbers and get a verdict. The SBA loan reality checkWhat a 7(a) really takes: down payment, coverage, and the checks beyond the math. Red flags when buyingNine warning signs that sink more deals than everything else combined.

FAQ

How long does buying a small business take?

From first conversation to closing, a few months is typical. LOI to closing alone often runs 60 to 90 days, and SBA financing adds its own timeline. Rushing the diligence pass to hit a date is how buyers end up paying for expensive surprises.

What kills most deals?

Most often, it's earnings that don't hold up once they're verified. The second most common cause is lender math that fails at the asking price. Both are pass-one checks, which is why it pays to run them before you spend money on diligence.

Can I do diligence myself?

You can do the organizing and the first read yourself. That's what this checklist and Scope are for. But bring a CPA in before you rely on the seller's numbers, and an attorney before you sign anything heavier than an NDA. You're paying for their judgment, so bring them a prepared file.

Educational content, not financial, legal, or tax advice for your situation. Confirm specifics with your own CPA and attorney.