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This checklist is built from the buyer's side of the table. Every item on it reflects something a serious acquirer will evaluate during diligence — either explicitly, through direct questions and document requests, or implicitly, through the assumptions they build into their model.
The goal is not to pass a test. The goal is to understand where you stand today, identify the gaps that are most likely to compress your valuation or kill your deal, and take the specific actions that close those gaps before you engage any process.
Work through each dimension honestly. The items you cannot check are your pre-market action plan.
The sellers who achieve the best outcomes are not the ones with the best businesses. They are the ones who understood the buyer's checklist before the buyer arrived.
The Five-Dimension Checklist
- At least 50% of revenue comes from recurring contracts or documented repeat arrangements
- No single customer exceeds 20% of annual revenue
- Top five customers have been with the business for three or more years
- Revenue is categorized by type (recurring, project, transactional) in financial reporting
- Customer churn rate is tracked and below 15% annually
- New business acquisition does not depend exclusively on the founder's personal outreach
Timeline to improve: 12–24 months · Valuation impact: high
- A capable second-in-command exists and has been visibly operating for at least 12 months
- Key client relationships are managed by team members, not exclusively by the founder
- The founder has stepped back from day-to-day operations in at least one meaningful area
- The business ran for at least 30 consecutive days without the founder's daily involvement in the past 12 months
- Client transition briefs exist for the top ten customers
- The founder can articulate, specifically, which revenue would survive their departure and which would not
Timeline to improve: 12–18 months · Valuation impact: very high
- Three years of complete, consistent financial statements are available (P&L, balance sheet, cash flow)
- Personal expenses run through the business are identified and documented for normalization
- A defensible add-back schedule is prepared showing normalized EBITDA or SDE
- Revenue and expense categorization is consistent year over year
- One-time or non-recurring items are clearly identified and explained
- A CPA or accountant has reviewed the financials within the past 12 months
Timeline to improve: 30–90 days · Valuation impact: moderate
- The business has at least one defensible moat — a reason a competitor cannot easily replicate it
- Key customer relationships are not exclusively personal to the founder
- Any licenses, certifications, or regulatory approvals are current and transferable
- Proprietary systems, processes, or IP are documented and owned by the company, not the founder personally
- The business can articulate its competitive position in one clear sentence
- There is a clear answer to what happens to competitive position under AI disruption in the next three years
Timeline to improve: varies · Valuation impact: high
- Core business processes are documented in SOPs that someone could follow without institutional knowledge
- Employee agreements include non-compete and non-solicitation provisions where appropriate
- Key vendor and supplier contracts are organized, indexed, and reviewed for change-of-control clauses
- Facility leases are reviewed for assignment provisions and remaining term
- Any pending legal issues, disputes, or contingent liabilities are identified and documented
- The management team structure is documented and each role's responsibilities are defined
Timeline to improve: 60–90 days · Valuation impact: moderate
How to Use This Checklist
Go through each dimension and mark honestly which items you can check today. The unchecked items are not failures — they are your pre-market action plan. Prioritize by valuation impact: founder dependence and revenue quality have the largest effect on what a buyer will pay. Financial clarity and operational documentation affect how fast and how clean the diligence process runs.
The timing column matters. Some items — cleaning up financials, organizing contracts — can be addressed in 30 to 90 days. Others — building a visible management layer, converting customers to retainers, reducing founder involvement in client relationships — require 12 to 18 months of consistent effort. The earlier you start, the more of the checklist you can complete before any process begins.
A business that checks every item on this list is not just more valuable — it is more defensible during diligence. Buyers find things. They always do. A business that has done this pre-market work gives the buyer less to find, less to use as leverage, and less reason to retrade after the LOI.
Written by Mike Ye — M&A and corporate development executive with 25+ years of transaction leadership. Former VP of Strategic Planning & Acquisitions at Penske Media Corporation. For advisory on your specific process, visit mikeye.com.