If you’re two or three weeks into diligence right now, you’re probably in the strangest part of the process. 

The LOI excitement has worn off. The findings call hasn’t happened yet. Documents are moving back and forth, and you’re mostly just waiting and wondering if the quiet means things are fine, or if it means something’s wrong and nobody’s told you yet.

That uncertainty is normal. It’s also mostly avoidable, if you know what a healthy engagement looks like at this stage.

This article walks through what good progress looks like right now, strong questions to ask your provider, and an idea of what’s actually coming next as diligence is underway. 

What You Should Be Seeing By Now

By the two-to-three week mark, assuming documents were provided in a reasonable time frame, you should already have a pretty good sense of whether this deal is moving forward. 

That doesn’t mean every number is finalized, but it does mean any major show-stoppers should have already been discovered by now. A good provider prioritizes finding those early, before a lot of additional work gets billed on a deal that might not go through. 

That’s part of why, in the case of working with Rapid Diligence, we offer dead deal credits so that if the deal doesn’t go through, you’re not paying for work for a deal that is no longer viable. 

From the outside, a healthy engagement generally looks busy. You should be seeing:

  • A steady stream of document requests and supplemental requests
  • Clarifying questions going back and forth — “this salary number doesn’t add up, can you explain this,” questions about add-backs, that kind of thing
  • The seller or broker actually responding to those requests

As long as documents are being uploaded and questions are being asked and answered over email, that’s generally a sign things are progressing the way they should.

What Should Already Have Been Reviewed

By this point, the major P&L, bank statements, and credit card statements, the core proof-of-cash exercise, should be largely done. That’s usually where anything materially misrepresented would already have shown up.

The sources that tend to be most revealing early are:

  • Bank statements
  • Credit card statements
  • The P&L and balance sheet
  • Customer concentration

Once those are reasonably tied up, the rest of the engagement shifts toward the details, numbers that can still move valuation by a meaningful amount, but as a percentage of the deal, shouldn’t represent the kind of structural issue that kills it. 

That’s the general pattern though it’s not a guarantee. Sometimes something does reveal itself later in the process. But if the early sources came back clean, that’s generally a good sign that things will continue that way. 

Questions Worth Asking Your Provider Right Now

If you want an actual status read on your diligence process ask your provider directly:

  • Is there a significant gap between the seller’s represented EBITDA and what the proof-of-cash exercise is showing?
  • Any major customer concentration issues?
  • Any undisclosed liabilities on the books?
  • Any issues with supplier agreements?
  • Anything on add-backs worth flagging?
  • Anything you’re seeing that’s a common reason deals tend to die at this stage?

Getting granular on the specific categories that tend to actually matter in diligence will help you know exactly what is being uncovered and also gain a better understanding of your provider’s process. Your diligence provider should be able to answer these questions and have a goal post for when the diligence process will be complete. 

Is Quiet a Good Sign or a Bad One?

With most legitimate diligence firms, quiet shouldn’t mean something’s wrong — it should just mean nothing’s wrong yet. At Rapid Diligence specifically, you’re not going to have a situation where we sit on a problem. If something’s off, we flag it and bring it to you as soon as we find it.

The one exception is when we’re waiting on documents. But even then, you’ll know, you’ll see the emails going out asking for what’s missing. Active communication is one of our values and key to how we run our diligence processes. 

Most of the actual back-and-forth happens over email rather than scheduled calls. If a recurring call is useful for you, or for the seller or broker, we’ll set one up. We also keep a standing placeholder on the calendar in case a conversation would move things faster than email would.

What’s Coming Next: The Findings and Q&A Phase

By the time the findings conversation happens, there shouldn’t be much that genuinely surprises you. 

That’s actually the mark of a good diligence process: you’ve been informed as things came up, not blindsided by a report at the end. You might learn that certain metrics look better than you expected, but a major issue landing on you for the first time in that meeting shouldn’t happen.

That said, the report itself is thorough, sometimes 50-plus pages. Going into that call having already read it and formed real questions is what makes the conversation useful. 

The buyers who get the most value out of the findings report are the ones asking for an analysis of the analysis, namely the harder, more specific questions, because they’ve already done the first pass themselves.

One thing worth knowing: we don’t cap support after delivery the way a lot of firms do. You’re not limited to one call with the analyst before everything becomes paid consulting. While that’s not the norm across the industry, it’s how we think support should work because we want to be a part of the continued success of the deal. 

In the meantime, it’s also important to keep operational diligence in mind beyond just the financials of the business. That might mean verifying that the business is truly hands off or a top customer isn’t tied to a relationship with the owner. It will be helpful to review the P&L yourself, flag anything that’s unclear, and make sure the elements of the deal that are a priority to you are fully addressed as it moves through diligence.

Where This Leaves You

If you’re a few weeks into diligence and the document requests, questions, and responses are flowing, that’s a good sign, even if it doesn’t feel like much is “happening” from where you sit. If it’s actually gone quiet in a way that doesn’t match any of this, that’s worth raising directly with your provider.

If you’re looking to start diligence and want a thorough read on your business’s financials, we’re happy to talk it through.