After you sign a letter of intent to sell your agency, you enter due diligence — a phase where the buyer investigates every material fact about your business. They review your financials, interrogate your clients, dig into your team, examine your contracts, and ask questions you didn't anticipate. This phase typically lasts 4-8 weeks and determines whether the deal actually closes. SEMrush's M&A research highlights that marketing agency due diligence has become more rigorous since 2021 -- with buyers now scrutinizing attribution data, platform account ownership, and staff dependence more thoroughly than ever.
We've worked with dozens of sellers during this process. The ones who sail through due diligence are the ones who arrive prepared. They have an organized data room. They understand their numbers cold. They know which documents to share and which to carefully manage. They prepare their team for buyer meetings.
The ones who struggle are usually surprised by what buyers ask for. They scramble to find documents. They discover inconsistencies in their records. They realize their team gives different answers to the same questions. They discover the buyer interprets something as a major risk.
This guide walks through exactly what buyers request during due diligence — organized by category — so you know what to prepare and what questions to expect. Use this as a checklist 6-12 months before you think you'll sell. Having these items organized now, before you're under time pressure, is the difference between a smooth process and a stressful one.
Financial Due Diligence: The Deep Dive Into Your Numbers
Buyers spend more time on financials than anything else. They're trying to verify that your stated revenue and profitability are real, not inflated or one-time driven. Prepare these documents before you need them:
Income Statements (3 years, monthly and annual): The buyer will reconcile these against your tax returns and bank statements. Any discrepancies create red flags. Have your CPA certify that these are accurate and complete.
Balance Sheets (3 years, annual at minimum): Shows assets, liabilities, and equity. Buyers will review accounts receivable (are clients paying on time?), inventory (if applicable), and especially any debt you haven't disclosed.
Cash Flow Statements (3 years, annual): Demonstrates actual cash in and out. Some agencies show profitability on paper but have cash flow problems — this reveals that issue.
Tax Returns (3 years): The buyer will compare these to your internal financials. Any material differences trigger questions. If you've been aggressive with tax deductions, expect scrutiny.
Add-Back Analysis: Document every adjustment you're making to EBITDA — owner compensation above market rate, personal expenses, one-time costs, etc. Include detailed explanations and supporting documentation for each add-back. This is crucial: a weak add-back analysis costs you millions in valuation.
Revenue Reconciliation by Client and Service Line (3 years): Break down revenue by client and show which clients contributed to growth, which left, which expanded. Buyers look for patterns: Is your growth concentrated in one or two clients? Are certain service lines declining? Do certain types of clients tend to churn?
Accounts Receivable Aging (current and historical): Shows how much money clients owe you and how long they've owed it. Large amounts of aged receivables signal collection risk or problem accounts.
Client Due Diligence: Verifying Your Revenue and Retention
The buyer assumes some clients will leave post-acquisition. They're trying to figure out how many and how to price that risk. Prepare:
Complete Client List (current and last 3 years): Every client you've had, with revenue, acquisition date, and status (active, churned, etc.). The buyer will be shocked by churn you haven't mentioned.
Client Contracts (all material accounts): Typically, that means every account over 5-10% of revenue, plus a sample of smaller accounts. The buyer will review terms, termination provisions, and renewal dates. Lock in long-term renewals before you start the sale process.
Client Concentration Analysis: Show the buyer that you understand your concentration risk. Break down revenue: top 10 clients, top 5, single largest client. If a single client is 20%+ of revenue, expect a significant valuation hit. The buyer wants proof that you're diversified.
Churn Analysis: For each cohort of clients acquired in a given year, how many are still around? What's the average lifetime? Which types of clients tend to stick? Which tend to churn? This is a powerful data point that shows whether you're acquiring sticky, valuable clients or clients who stick around for 12-18 months and leave.
Client References: The buyer will want to speak directly with your top 5-10 clients. Coach them beforehand on what they might be asked. Brief them on the transaction so they're not blindsided. A single negative reference from a major client can crater a deal.
Customer Acquisition Cost and Lifetime Value: Show the economics of how you acquire clients. How much do you spend to win a client (sales, marketing, delivery resources)? How much do they spend over their lifetime? If acquisition costs exceed lifetime value, that's a major problem.
Legal and Contractual Due Diligence: Exposures and Obligations
The buyer is looking for hidden liabilities and legal risk. Compile:
All Material Contracts (not just client contracts): Vendor contracts, software licenses, employment agreements, non-competes, service level agreements, partnership agreements. The buyer wants to understand what obligations you're passing along and what relationships are non-transferable.
Litigation History and Outstanding Claims: Any lawsuits, threatened lawsuits, disputes with clients or employees, regulatory complaints, or settlement agreements. Disclose these proactively. A buyer who discovers undisclosed litigation post-close will use it to renegotiate or walk.
Intellectual Property Documentation: Trademarks, copyrights, domain names, proprietary processes, source code. Proof that you own what you claim to own. If you've been using a process you learned from a competitor, make sure there's no risk of infringement claims.
Compliance and Regulatory Documentation: Depends on your services, but include: privacy policy, data protection compliance (GDPR, CCPA, etc.), any industry-specific regulations, insurance policies and coverage. If you work with industries like healthcare or finance, compliance is critical.
Employee and Contractor Agreements: Offer letters, employment agreements, independent contractor agreements, non-competes, confidentiality agreements. The buyer wants to confirm you have proper documentation and that key people have non-competes in place.
Operational Due Diligence: How Your Business Actually Works
The buyer wants to understand whether you've built a business that can operate without you. Provide:
Organizational Chart with Key Person Bios: Show the structure and detail out the background, role, and years with the company for each key team member. Highlight backup and succession plans. If you're the CEO and you've listed no backup for any critical role, that's a problem.
Documented Processes and Playbooks: Your sales process, delivery process, client onboarding, hiring, and decision-making framework. Write these down. They don't need to be perfect, but they need to exist and be clear enough that someone else could follow them.
Technology Stack and Systems Documentation: What platforms do you use? (CRM, project management, accounting, etc.) Who has access? Who maintains each system? What's the backup plan if someone leaves? Are your data and processes documented in a way that someone else could take over?
Metrics Dashboard: Show metrics you track: pipeline, conversion rates, project profitability, team utilization, client retention, NPS. This demonstrates that you manage by data, not gut feel.
Client Success Stories and Case Studies: Documentation of your best work and strongest client relationships. This gives the buyer confidence in your capabilities and helps justify your positioning and pricing.
Tax and Accounting Due Diligence: What Will be Adjusted
The buyer's accountants will review how you've been accounting for items. Prepare:
Schedule of All add-backs (with supporting documentation): Owner bonus, personal expenses, one-time costs, depreciation, amortization, stock-based compensation. Document each one thoroughly. Weak documentation on add-backs is the most common reason valuations get reduced during diligence.
Tax Provision Calculations: How are you calculating taxes? Do you have any deferred tax liabilities? Have you been aggressive on deductions that might not withstand audit?
Debt and Obligations: Any outstanding loans, lines of credit, seller financing, deferred compensation, or contingent liabilities. The buyer will adjust your purchase price down by any debt you're passing to them.
Warranty Reserve and Indemnity Escrow Details: Be prepared to discuss post-close holdbacks. A typical deal holds back 10-15% of the purchase price in escrow for 12-24 months to cover any breaches of your representations and warranties.
Preparing Your Data Room and Response Process
Create a secure folder (Google Drive, Dropbox, ShareFile, or a dedicated data room platform) organized by category. Index everything. Provide a cover memo explaining what's included. Name files clearly and consistently. When the buyer makes an information request, assign a single person to respond, gather documents, and send them within 2-3 business days. Slow responses kill momentum and create doubt.
Have your attorney and CPA review sensitive documents before you share them. You want to balance transparency with protection of privileged information.
Get Diligence-Ready. Then Talk to a Buyer Who Knows This Space.
We buy what we understand.
We're operator-led acquirers of marketing agencies. We know how retainers work, what EBITDA add-backs are legitimate, and how to read a client roster. We buy outright at fair multiples, keep your team, and if you want, you can roll equity into the $50M+ platform exit we're building. No lecture on 'owner dependency.' Just a straight offer.
Talk to UsRed Flags Buyers Will Dig Into During Due Diligence
Expect detailed questions on these items if the buyer spots them:
- Client concentration (single client > 15% revenue): Buyer will investigate whether this client will stay post-acquisition or is considering leaving.
- Revenue decline or flat growth: Buyer will question whether the decline is permanent and what it means for future profitability.
- High churn in recent cohorts: Buyer will wonder if your service quality is declining or if your market is shifting.
- Large one-time revenue items: Buyer will question whether these are recurring or if they distort your sustainable profitability.
- Dependence on key person: If you're the rainmaker or lead strategist and you're not staying, buyer will heavily discount valuation.
- Weak add-back documentation: Buyer will reduce your EBITDA if you can't substantiate add-backs with clear evidence.
- Employee turnover or key departures: Buyer will worry about additional departures and integration risk post-close.
Frequently Asked Questions
Questions we hear most from sellers going through due diligence.
Final Thoughts
Due diligence feels invasive, but it's also your chance to tell a clear, honest story about your business. The sellers who navigate it best are the ones who understand that the buyer isn't looking for perfection — they're looking for truth. A clean narrative that includes acknowledged risks is better than a defensive one hiding problems.
Get organized now. Prepare your data room. Have your CPA review your financials and add-back analysis. Brief your team on what they might be asked. When due diligence begins, you'll move through it smoothly, close the deal faster, and walk away feeling confident about what you've built.
