How to Prepare Your Financials Before Selling Your Home Service Business
Clean financials add hundreds of thousands to your sale price. Here's exactly how to organize your books, document add-backs, and present your numbers to buyers.
Read Article →Due DiligenceMarch 2025 · 9 min read
Due Diligence Checklist for Selling a Home Service Business
What buyers request during due diligence — and how to prepare so the process doesn't kill your deal. A complete checklist for home service business sellers.
JT
Jason Taken
HedgeStone Business Advisors
Due diligence is the period after you sign an LOI where the buyer verifies everything you've represented. It typically runs 30–60 days and covers financials, operations, legal, HR, and customers. The better prepared you are before the process starts, the faster it moves and the less likely it is to surface surprises that cause a re-trade.
Financial Due Diligence Documents
Buyers will request: 3 years of tax returns (federal and state), 3 years of P&L statements, 3 years of balance sheets, trailing 12-month financials, accounts receivable aging report, accounts payable aging report, bank statements (12–24 months), all loan documents and outstanding debt schedules, SDE recast with backup documentation for each add-back, and any financial projections you've shared.
Operations Due Diligence
Operations requests: employee list with job titles, compensation, tenure, and key person risk notes. Contractor vs. employee classification documentation. License and certification copies for all required trade licenses. Equipment list with age, condition, and current value. Software and systems list (field service software, CRM, accounting). Standard operating procedures. Safety records and OSHA compliance documentation. Insurance certificates.
Customer and Contract Due Diligence
Customer requests: top 10–20 customers by revenue (expect buyers to anonymize and verify concentration risk). Maintenance agreement database (count, average monthly value, renewal rate). Commercial contracts — copies of all contracts over $25K/year. Customer churn data by year. Referral sources and marketing channel attribution. Any customer disputes or pending refund requests.
Legal Due Diligence
Legal requests: business formation documents (LLC operating agreement or corporate bylaws). Any pending or historical litigation. Environmental compliance (for businesses using chemicals — pest control, lawn care). OSHA records. Worker's compensation history. Trademark or intellectual property registrations. Real property lease copies. Vehicle titles and equipment titles.
How to Prepare Before the LOI
The sellers who close the fastest and at the highest price are those who prepare their due diligence package before going to market. Assemble a virtual data room with all of the above documents organized by category. Review your tax returns for inconsistencies with your P&L. Document every add-back. Get copies of all licenses. This preparation often takes 30–60 days — time well spent before you're under LOI.
Frequently Asked Questions
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