What Happens After You Sign: What the Due Diligence Process Actually Looks Like
- Jun 16
- 3 min read
Mike figured if he could get through the negotiation, he was through the worst of it.
After months of conversations, a signed letter of intent felt like crossing the finish line. The price was agreed on, the buyer was serious, and for the first time, the deal felt real. What he hadn't thought much about was everything that came next.
Due diligence (the stretch between signing the LOI and closing) is the part of the process most sellers are least prepared for. It's not complicated once you know what's actually happening. But walking in blind makes it feel a lot heavier than it needs to be.
Here’s what it actually looks like.
What Due Diligence Is, and Why Buyers Do It
When a buyer signs a letter of intent, they're committing to a price based on what you've told them. Due diligence is how they confirm it's true.
They're not looking for a reason to walk. Most buyers want to close, as they've already put real time and money into getting this far. What they're doing is making sure what they're buying matches what they think they're buying and getting comfortable enough with the risks to fund the deal.
Understanding that changes how you approach it.
What Buyers Are Actually Looking At
Financials
This is where buyers go deepest. Expect requests for two to three years of tax returns, profit and loss statements, and bank statements.
They'll reconcile your numbers against the documents line by line. If you've got owner add-backs such as above-market pay, personal expenses through the business, or one-time costs that won't repeat.
You need to have them itemized and documented. Anything that can't be verified on paper gets discounted or cut.
Revenue
Buyers want to understand where the money actually comes from.
How much is recurring versus one-time work? What does your customer concentration look like? Are your maintenance agreements backed by signed contracts, or do they mostly exist in your head?
The clearer the revenue story is on paper, the more confidently a buyer can price it.
Operations
Who are the key employees? What do they actually do? Are there documented processes for scheduling, pricing, and service calls, or does that knowledge live entirely with you?
Buyers are looking for evidence that the business keeps running after you walk out the door.
Legal and compliance
This is usually handled by the buyer's attorneys.
They'll check licenses, insurance, leases, vendor contracts, and any past or pending litigation. For a well-run business, most of this is routine. What slows things down are surprises like an expired license, a lease with a tricky transfer clause, and a contract with an auto-renewal nobody caught.
How Long Does It Take?
For most HVAC businesses in the $2M–$10M revenue range, diligence runs four to eight weeks. Bigger or more complex deals take longer. But the biggest factor isn't the size of the business. It's how prepared the seller is.
Owners who show up with organized financials, documented agreements, and clear operational systems move through quickly. Deals stay on track. Buyers stay engaged.
Owners who are scrambling to pull things together after the LOI is signed create delays. And delays are dangerous; they give buyers time to get cold feet, find other deals, or start wondering why things weren't ready in the first place.
The best preparation for diligence doesn't happen after you sign. It happens months before you go to market.
What Mike Learned Going Through It
Mike had built a tight operation. His customers were loyal, his revenue was solid, and his maintenance base was real. The problem was how it looked on paper.
About a third of his maintenance agreements were handshake deals — no signed contracts behind them. Not unusual for an owner-run business, but not what a buyer's team wants to see.
His advisor helped him formalize those before going to market.
By the time the buyer came in for diligence, everything was documented, organized, and easy to verify. The process took five weeks and, as Mike put it, wasn't nearly as painful as he'd expected.
The reason? The work they did beforehand.
Due diligence doesn't have to be the thing that derails your deal. With the right preparation and someone managing the process who's done it before, it becomes exactly what it's supposed to be: confirmation that you built something worth buying.
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If you're thinking about selling your business, or just starting to wonder what it might be worth, NorthBase is a Merger & Acquisition firm that specializes in representing business owners in the Home Service trades. We have 20 years of experience, established relationships, and a professional process to maximize your financial outcome.
Contact Jason Hoff, Founder & M&A Advisor at 970-581-9698 | Jason.Hoff@NorthBase.com
