Due Diligence Checklist for Buying a Business (AU & UK)

Q: What should I check before buying a business?

At minimum: three years of financials (not just the last one), Adjusted EBITDA or SDE with every add-back justified, customer concentration, the debt schedule, working capital position, and any related-party transactions. Most deals fall over on the financial side, not the legal side — verify the numbers before you spend money on lawyers.

Q: What is SDE and why does it matter in due diligence?

SDE (Seller's Discretionary Earnings) is EBITDA plus the owner's salary, personal expenses run through the business, and genuine one-off costs. It matters because it is the number that actually determines what the business pays you if you run it — not the number on the tax return, which is usually minimised deliberately.

Q: How long does due diligence take when buying a business?

For an SME in the $1.5M-$10M range, financial due diligence typically takes 2-6 weeks once you have full access to records, longer if the seller's bookkeeping is disorganised or add-backs are not well documented.

Q: What red flags should stop a business acquisition?

Declining revenue with no credible explanation, one customer over 20-25% of revenue, add-backs that cannot be evidenced, financials that do not reconcile between the P&L and the bank statements, and a seller who will not provide three years of records are the five most common deal-killers.

Q: Can I do due diligence myself or do I need an accountant?

You can and should run the numbers yourself first — most of the checklist is verifying figures the seller has already provided, not forensic accounting. Bring in an accountant to sanity-check adjusted EBITDA and a lawyer for contracts once you are confident enough in the numbers to move to an offer.

By John Warner, founder of BuyBuildSell — the AU & UK M&A deal room · Last updated: September 2026

Most people who reach the point of having a real business to buy have already put in real work — sourcing the deal, building rapport with the seller, working out how to structure and finance it. The gap is almost always the same: nobody taught them how to actually verify the numbers before they commit.

What due diligence actually means

Strip away the jargon and financial due diligence is one question: is the profit the seller is showing you real, and will it still be there once you own the business? Everything on this checklist exists to answer that one question.

The financial checklist

Three years of financials, not one. A single good year tells you nothing. Look for the trend — growing, flat, or declining — and ask why.

Adjusted EBITDA or SDE, with every add-back evidenced. An above-market owner salary, personal expenses run through the business, one-off costs — each one needs a receipt or record behind it, not just the seller's word.

Customer concentration. If one customer is more than 20-25% of revenue, that relationship walking away after settlement is a real risk you need to price in.

The debt schedule. What does the business actually owe, to whom, and on what terms? This changes your real purchase price even when it's structured separately from the headline number.

Working capital position. Cash, debtors, creditors, stock — make sure what you're buying includes enough working capital to actually run the business from day one.

Related-party transactions. Rent paid to the owner's own property, supplies bought from a company the seller also owns — these can distort the real cost base either way.

Reconciliation. Do the P&L figures actually match the bank statements and tax returns? Numbers that don't reconcile are the single biggest tell that something's being smoothed over.

SDE vs EBITDA — know which one you're actually being quoted

If you're buying a smaller, owner-operated business, you'll usually be shown SDE (Seller's Discretionary Earnings) — EBITDA plus the owner's salary and personal add-backs, because the assumption is you'll be the one running it day to day. Larger, management-run businesses use EBITDA on its own. Mixing the two up — valuing an SDE business as if the multiple applies to EBITDA, or vice versa — is one of the fastest ways to badly overpay. See the full breakdown of how multiples work by business type →

⚠️ Red flags that should slow you down — or stop the deal

Declining revenue with no credible explanation from the seller
One customer over 20-25% of total revenue
Add-backs the seller can't or won't evidence
Financials that don't reconcile between the P&L, bank statements, and tax returns
A seller unwilling to provide three full years of records

How long this actually takes

For an SME in the $1.5M–$10M range, expect 2-6 weeks once you have genuine access to records — longer if the bookkeeping is disorganised or add-backs aren't well documented going in. Rushing this step to "not lose the deal" is how avoidable mistakes get made.

If you've come through an acquisition-training course, you likely already know how to find a deal and how to structure and negotiate it. Verifying the numbers with real rigour is the part most courses don't have time to cover in depth — which is exactly the gap this checklist, and the tool below, are built for.

Run the numbers before you sign

Upload the seller's figures and BuyBuildSell calculates Adjusted EBITDA, flags the red flags above automatically, and gives you the same due-diligence view a buyer's advisor would — free during your trial.

Start your free trial → See how valuation works →

Frequently asked questions

What should I check before buying a business?

At minimum: three years of financials, Adjusted EBITDA or SDE with every add-back justified, customer concentration, the debt schedule, working capital, and related-party transactions. Most deals fall over on the financial side, not the legal side.

What is SDE and why does it matter in due diligence?

SDE is EBITDA plus the owner's salary, personal expenses run through the business, and genuine one-off costs. It's the number that determines what the business actually pays you if you run it — not the number on the tax return.

How long does due diligence take when buying a business?

Typically 2-6 weeks for an SME once you have full access to records, longer if bookkeeping is disorganised or add-backs aren't well documented.

What red flags should stop a business acquisition?

Declining revenue with no explanation, one customer over 20-25% of revenue, unevidenced add-backs, financials that don't reconcile, and a seller unwilling to provide three years of records.

Can I do due diligence myself or do I need an accountant?

You can and should run the numbers yourself first. Bring in an accountant to sanity-check adjusted EBITDA and a lawyer for contracts once you're confident enough to move to an offer.

Found a business to buy? Here's the checklist.