Buying a business
Five Key Points All Buyers Should Investigate
The five things to check before buying a company, what to request for each, and the warning signs that should make you pause.
By Michael D. Rubin, CEO & Founder · Updated September 2026 · 730 words
Before you commit to buying a company, investigate five things: how the business actually performs, whether its financial records hold up, whether you want to do this work, how dependent it is on a few customers or suppliers, and whether its past plans match its results. Most buyers get excited about an opportunity long before they have checked any of these. Enthusiasm helps get a deal done; it is a poor tool for deciding whether to do one.
Keep the decision cold
It is normal to like, or dislike, a seller, and to picture yourself running the company after one visit. Neither should decide anything. The same goes for the time you have already spent: weeks of meetings are not a reason to close if the facts turn against you. A buyer who walks away from a bad deal late in due diligence, the detailed review before closing, has made a good decision, not wasted one.
Write down in advance what you would need to see to proceed and what would make you stop. It is much easier to hold that line when you set it before you have fallen for the company.
The five points and what to check
| Point | What to request or check | Warning signs |
|---|---|---|
| Performance and workload | Monthly revenue and margins for three years, the owner's weekly hours, who manages what | Results that depend on the owner working every hour, with no one ready to share the load |
| Financial records | Tax returns, profit and loss statements, balance sheets and bank statements that agree | Figures that do not tie out, large unexplained add-backs, cash that cannot be traced |
| Your own interest | Time with the seller on a normal day and on a busy one | Work you would dread, or a role you would need to hand off at once |
| Concentration | Revenue by customer and purchases by supplier for three years | One customer or supplier large enough to hurt the company badly if it left |
| Plans versus results | Past budgets, plans or goals, and what actually happened | No plan at all, or targets missed year after year without explanation |
Performance includes the people behind it
Strong numbers produced by an exhausted owner are not the same as strong numbers produced by a team. Ask how much of the work the owner does personally, and who could take on part of it after closing. A capable manager already in place is worth a great deal, especially in a demanding business. If there is no one, budget for hiring that person and include the cost in your view of earnings.
Financials: read everything, trust what reconciles
Once the confidentiality agreement is signed and you have access, review bank statements, profit and loss statements, balance sheets and tax returns together. The question is not whether the numbers look good but whether they agree. Revenue on the tax return should match the financial statements, and bank deposits should support reported sales. Add-backs, the owner's personal or one-time costs added back to profit, should each have a document behind them.
A serious problem you cannot resolve is usually a reason to walk away, whatever you have invested so far. Our answer on why sales fail in due diligence lists the usual culprits.
Concentration is a risk, not always a deal-breaker
A company that relies on one customer, a handful of accounts or a single supplier is fragile, and the price should reflect that. It is not automatically a reason to walk away. If you can see a realistic way to add customers or secure a second supplier, the risk may be manageable. See how customer concentration affects value for how it is usually treated.
Ask whether the large customer has a contract, whether that contract transfers to a new owner, and whether the relationship belongs to the company or to the seller personally.
Where MDR & Associates fits
No business is perfect, and waiting for one means never buying. The aim is a company that makes financial and personal sense and can grow under you. MDR & Associates represents sellers, and each company it markets comes with a financial recast and a confidential marketing package prepared for exactly this kind of review. Buyers register, sign an NDA and complete a financial profile before receiving details, and the firm can help arrange acquisition financing. To see what is available, start on the buyer page.
Where this fitsBuy a business in Texas →
Questions owners ask next
How long should due diligence take when buying a smaller company?
It depends on the size of the company, the state of its records and your lender's requirements; well-organized sellers make it faster. Agree a realistic period in the letter of intent with a clear list of what you need, and ask in writing for an extension if real problems appear.
Should I hire my own accountant for due diligence?
Yes. The seller's recast is a starting point, not a verification. An accountant working for you can test revenue, add-backs, working capital and tax filings, and will catch issues a first-time buyer would miss. Most buyers also use a transaction attorney to review contracts, leases and liabilities.