Get the company records right before anyone tests the story

Before a buyer or investor tests how good the business is, they test whether it actually exists the way you say it does. This is the most basic layer of due diligence and the one most founders underestimate, because it feels too simple to cause a problem. It causes problems constantly.

Make sure Companies House matches your real structure

Does the legal name on the documents match the company number? Is the registered office current? Are confirmation statements and director changes filed and up to date? If Companies House says one thing and the business operates another way, the natural question from a buyer’s adviser is what else might be out of sync. It is a small thing to fix and an easy thing to be caught out by.

Check your share capital, cap table and founder agreements

Can you produce one clean schedule showing exactly who owns what? That means issued shares, any option pool, convertible instruments, the PSC register, and any side letters or informal promises made along the way to founders, advisers or early hires. Ownership should never rest on memory, an old email thread, or a spreadsheet with three conflicting versions floating around the team.

Review your articles and shareholder terms before a deal starts

Articles of association and shareholders’ agreements carry more weight than most founders expect. Pre-emption rights, consent rights, transfer restrictions and reserved matters can all affect a raise or sale. If an earlier approval was missed, or the documents no longer reflect how the company actually runs, that problem tends to surface in the middle of negotiations, exactly when you have the least time to fix it.

Build a finance pack that proves your numbers are reliable

Your numbers do not need to be flashy. They need to reconcile, explain the past clearly, and support a credible view of the next twelve months. This is the section where most diligence conversations either build confidence quickly or start unravelling it.

Show clear accounts, cash flow and runway

A serious finance pack moves people from sceptical to confident fast. You need current management accounts, the latest statutory accounts, a balance sheet, profit and loss, cash flow reporting, bank statements, and a clear view of runway. Handing over the reports is not enough on its own. Your team needs to be able to explain movement, seasonality, and any sharp changes without hesitating.

Explain revenue quality, margins and forecast accuracy

Headline revenue rarely tells the full story. Investors want to know whether income repeats, how churn behaves, what your MRR or ARR actually means in practice, and how gross margins are holding up under pressure. Forecasts need to be tied to real, defensible assumptions, not optimism. Budget versus actual performance matters here too, because it shows whether the business can plan with discipline rather than just react.

• ✓Management accounts for the trailing 12 months, reconciled to bank
• ✓Latest filed statutory accounts and supporting workings
• ✓Rolling 13-week cash flow and a clear runway calculation
• ✓Revenue bridge showing recurring versus one-off income
• ✓Budget versus actual, with variances explained in plain English

List debts, liabilities and anything that affects value

Hidden liabilities are where deals start to wobble, and they almost always come out eventually. Pull together loans, leases, unpaid suppliers, deferred income, director loans, tax liabilities and any unusual balance sheet items. If there is an odd number sitting in the accounts, explain it before anyone has to ask. People are far more relaxed with a known issue than a surprise discovered late, after trust has already been spent.

This is exactly the kind of work we cover in detail in our guide on how to prepare your accounts for a business sale, including how add-backs and one-off costs should be documented so they survive buyer scrutiny.

Get your tax, payroll and compliance documents in order

This is where small, easily fixed gaps quietly become expensive ones. UK buyers and lenders will always want the filing position to be clear, current and explainable.

Organise Corporation Tax, VAT and PAYE records

Tax diligence escalates quickly, even in smaller companies. Keep Corporation Tax filings, VAT returns, PAYE records, HMRC correspondence, payment history and any open queries together in one place. The finance team should be able to say clearly what has been filed, what is currently due, and what is still under review with HMRC. Guesswork here makes a perfectly healthy business look far less controlled than it actually is.

Review payroll, pensions and employment compliance

Payroll needs a clean, unbroken trail. Keep payroll summaries, RTI submissions, pension auto-enrolment records, and evidence that staff have consistently been paid correctly. Check contractor status carefully too. Someone treated as self-employed on paper but managed day-to-day like an employee can create tax and employment risk that a buyer will price straight into their offer.

Check licences, data protection and sector rules

Not every SME is regulated in the same way, but every business carries some compliance footprint. That might mean permits, health and safety records, GDPR and privacy documentation, or sector-specific approvals. If the company handles customer data, regulated products, or any licensed activity, you need proof, not assurance, that the basics are in place and current.

Open HMRC enquiries and unreconciled VAT positions are two of the most frequent reasons a deal timeline slips by weeks rather than days. Both are entirely avoidable with a few hours of preparation.

Prove your contracts and intellectual property are secure

A strong product and good sales figures are not enough on their own if the underlying contracts or intellectual property can quietly slip away from the company. This is where genuine commercial value either holds up or gets discounted.

Review customer, supplier and lender contracts for hidden issues

Key contracts often hold the real commercial story behind a business. Review major customer terms, supplier agreements, leases, loans, guarantees and any security documents. Look closely for auto-renewal clauses, termination rights, change of control wording, and any contracts that require consent before a sale or investment can complete. Concentration risk matters here too. One customer representing too large a share of revenue will always draw attention from a buyer’s team.

Make sure the company owns the IP it trades on

If the brand, code, content or product design is what drives your valuation, ownership needs to sit cleanly with the company, not with an individual. That includes founder-created work, employee inventions, contractor output, trademarks, domain names, software and agency-created assets. Missing IP assignment documents can weaken a valuation fast, particularly where the business depends heavily on proprietary technology or a recognisable brand.

Check open-source software and third-party rights

Technology diligence is not only a job for lawyers. If your product uses open-source components, the team should know exactly which licences apply and whether there are usage limits attached. The same goes for third-party content, images, datasets or software tools. If the company is using something it does not properly own or licence, it can become a genuine deal issue rather than a footnote.

Spot people, operations and risk gaps before they slow the deal

This is the part founders most often carry in their heads rather than on paper. That is exactly why it needs writing down before someone else asks for it in a data room.

Keep key staff, role and policy records easy to find

A tidy people file tells a simple, reassuring story: the business is managed properly, not improvised. Keep employee and contractor lists, signed contracts, salary and benefits records, policies, handbooks, and details of any live disputes or grievances together and current. Missing files create noise during diligence. Clear records help a buyer or investor see a stable business rather than a risky one.

Show how the business actually runs day to day

A buyer or lender wants to understand what happens on an ordinary Tuesday. How are sales logged? How is the work actually delivered? Who approves payments? What systems run bookkeeping, payroll, CRM and reporting? If every single answer comes back to the founder personally, the business looks harder to scale and considerably riskier to back, regardless of how good the numbers look.

Businesses that can clearly show delegated authority, documented processes and systems beyond the founder’s inbox consistently negotiate from a stronger position, because the buyer is paying for a business, not for one person.

Create a simple risk register with missing items and open actions

Perfection is not the goal here. Visibility is. Keep a working risk register that lists known issues, missing documents, action owners and deadlines. This file can be plain and short, it does not need to be polished. What matters is honesty. A business that knows its own gaps and is actively closing them almost always presents better to a buyer than one pretending there are none.

This is also the moment where independent valuation evidence tends to carry real weight. If you have not had a formal view on where the business stands, our business valuation services page sets out how we approach that work and what it typically uncovers.

Due diligence should support growth, not threaten it

Founder-led finance teams do not need a perfect archive. They need clean records, clear ownership, and numbers that stand up under pressure without a founder having to talk a buyer through every line. When that becomes a habit rather than a scramble, due diligence stops being the thing that nearly kills a deal and starts being the thing that supports your next raise, your next refinancing, or your eventual exit.

If you are weighing up whether to bring in support before opening a data room, our guide on what to do next when someone wants to buy your business is a useful place to start, particularly if a conversation has already begun.