7 Due Diligence Mistakes That Kill Deals
Over the last 18 months, I’ve supported 40+ acquisitions. Most looked great on paper. Clean P&Ls. Strong revenue. Motivated sellers.
But when deals fall apart, it’s rarely because of the price. It’s almost always because something was missed in diligence. Not the obvious stuff, but the quiet stuff hiding just beneath the surface.
These are the 7 mistakes I see again and again:
Revenue Isn’t Cash
I’ve seen businesses doing $5M+ in revenue that couldn’t make payroll. Revenue gets inflated, deferred, or booked on weird terms. Cash flow tells the real story. Always check collections, AR aging, and burn.
Customer Concentration
In one deal, 68% of revenue came from one customer. We only caught it after digging into invoices by client. The seller brushed it off. That’s not diligence, that’s a gamble.
Normalize Everything
Owner salaries, personal expenses, missing hires, all buried. We rebuild the P&L from scratch to reflect reality post-close. Reported EBITDA means nothing if it’s not normalized. I go deeper on this in The Silent Killers of M&A.
Working Capital
Most models stop at the closing date. Then buyers scramble 60 days later. Always model Day 1 to Day 90.
Tax and Legal
A missed payroll tax filing from 2019 can kill a deal. You need advisors who understand small business M&A. Dig through past filings. Ask dumb questions.
Seller Transition
In small businesses, the seller is the business. Without a structured handoff, everything breaks. We always push for timelines, knowledge transfer, and retention.
Beyond Numbers
Culture doesn’t show up in a spreadsheet. Shadow the team. Sit in meetings. You’ll learn more in two days on-site than two weeks in Excel.
The Takeaway
Diligence is not about confirming what the seller shows you. It’s about finding what they don’t. If you’re serious about buying a business, you need more than a checklist. You need reps. You need real-world frameworks.
That’s what we teach in the ETA Bootcamp. Real deal reviews. Real processes. And the exact system we use to diligence deals across industries.