When you're getting ready to sell your business, due diligence is a crucial part of the process. It’s how potential buyers get a deep understanding of your business’s day-to-day operations, financial health, and the important relationships that help keep it running. Here’s a look at what “operational” or “commercial due diligence” involves and how it differs from other types of reviews.

3 Things to Know About Commercial Due Diligence

1. Commercial Due Diligence Looks at Daily Operations

   Unlike legal or financial due diligence, commercial due diligence focuses on how your business operates day-to-day. Buyers want to confirm that everything you’ve shared about your business’s operations is accurate. They’ll check out relationships with suppliers, vendors, and key customers, look at your organizational structure, and assess your staffing. Think of it as a “behind-the-scenes” check to ensure there are no surprises after the sale.

2. It Examines Business Relationships and Dependencies

   Buyers will review who you do business with and the nature of these relationships. Are there any critical dependencies, like key suppliers or major customers who contribute a large portion of your revenue? Buyers want to know about any conditions that could impact revenue or profitability after they buy the business. This helps them assess whether your business relationships are stable and if any risks could arise down the road.

3. Clear Differences Between Commercial, Legal, and Financial Due Diligence

   Each type of due diligence serves a different purpose:

   • Legal Due Diligence reviews contracts, agreements, and company structure.

   • Financial Due Diligence examines cash flow, revenue, expenses, and the financial foundation of your company.

   • Commercial Due Diligence focuses on how the business actually functions operationally, not its financials or legalities.

Key Terms to Know

• Commercial Due Diligence: A review of a business’s operations, including relationships with customers, suppliers, and employees, to assess non-financial risks and the stability of daily operations.

• Dependencies and Contingencies: Critical relationships or conditions (like key suppliers or major customers) that could impact business stability or profitability.

Preparing for a Successful Sale

By understanding and preparing for the different types of due diligence, you can make the deal process smoother and address any concerns in advance. Commercial due diligence helps showcase your business’s full potential by highlighting its stability and operational strength, boosting buyer confidence, and positioning your company as a valuable acquisition.

For more expert insights on preparing your business for sale, check out the resources at Candor Advisors.