Due diligence begins the moment your LOI is signed. For the next 45–90 days, a buyer will systematically review your financials, operations, legal structure, licensing, and customer relationships. How prepared you are for this process determines whether you close on time, close with the original price, or watch the deal fall apart.
This checklist covers everything a serious buyer will request. Run through it before you go to market — not after an LOI lands in your inbox.
Financial Due Diligence
| Document | Years Required | Notes |
|---|---|---|
| P&L statements (income statements) | 3 years + TTM | Monthly detail preferred, not just annual |
| Balance sheets | 3 years + most recent | Must reconcile to tax returns |
| Cash flow statements | 3 years | Operating, investing, financing activities |
| Federal tax returns (entity) | 3 years | K-1s if S-corp or partnership |
| Bank statements | 12–24 months | All accounts, all months |
| Accounts receivable aging | Current | Plus 12-month history |
| Accounts payable aging | Current | |
| Payroll records | 2–3 years | By employee and role |
| EBITDA bridge / add-back schedule | 3 years | Document every adjustment with source |
| Revenue by customer / segment | 3 years | Reveals concentration risk |
| Revenue by service line | 3 years | Recurring vs. break-fix breakdown |
Operational Due Diligence
| Item | What Buyers Are Looking For |
|---|---|
| Org chart and key employee list | Who runs what; who's critical to operations |
| Employee tenure and compensation | Flight risk; market-rate pay |
| Subcontractor agreements | Who you use and on what terms |
| Equipment list with ages | What needs replacing; deferred capex |
| Vehicle fleet list | Age, condition, owned vs. leased |
| Service agreement list | Count, revenue, terms, renewal rates |
| Top 20 customer list with revenue | Concentration analysis |
| Dispatch and scheduling software | What systems you use; how data transfers |
| Marketing and lead generation sources | Where revenue comes from; CAC |
| Operations manuals / SOPs | How documented are your processes |
Legal and Compliance Due Diligence
| Item | Notes |
|---|---|
| Articles of incorporation / operating agreement | Entity formation documents |
| Ownership structure and cap table | Who owns what percentage |
| All active contracts (customers, vendors, landlords) | Assignability is critical — can they transfer to buyer? |
| Lease agreements | Office, warehouse, equipment leases |
| Open litigation or threatened claims | Any disputes, OSHA violations, warranty claims |
| Insurance certificates (past 3 years) | GL, workers comp, commercial auto, E&O |
| Workers' comp claims history | Mod rate and claims history |
| Employment agreements | Non-competes with key employees |
| Environmental assessments (if real estate involved) | Phase I required by most lenders |
Licensing and Regulatory Due Diligence
This is where plumbing businesses are unique. Buyers will focus heavily on licensing continuity — it's one of the first things PE firms check in the trades.
| Item | Why It Matters |
|---|---|
| Master plumber license (who holds it) | Can it transfer? Who qualifies the business post-close? |
| State contractor license (if applicable) | Some states require separate contractor license |
| Business license(s) — all jurisdictions where work is performed | Multiple jurisdictions means multiple licenses |
| Bond and surety information | Transfer requirements |
| Permit history | Any pulled but unclosed permits; violations |
| DOT compliance (if vehicles over 10,001 lbs) | Driver logs, maintenance records, FMCSA registration |
| OSHA compliance history | Inspection reports, citations, fines |
How to Prepare: Build a Virtual Data Room Now
Don't wait for a buyer to ask. Organize all of the above in a virtual data room (Dropbox, Google Drive, or a dedicated VDR platform) with clean folder structure and labeled documents. Sellers who hand buyers a complete, organized data room on day one of due diligence signal professionalism — and often close faster and at better prices than sellers who scramble to find documents under time pressure.
Start building your data room 6–12 months before you plan to go to market. Use the checklist above. Any gaps you find will be the same gaps a buyer finds — better to address them on your schedule than on theirs.
→ How to Prepare Your Plumbing Business for Sale The full 18-month prep timeline before going to market → Letter of Intent in a Plumbing Business Sale What triggers due diligence and how the LOI sets the termsAlso in the Lightning Path Guide Series
Own a HVAC business? See our companion guide: HVAC Business Due Diligence Checklist
DISCLAIMER: The information on this page is provided for general informational and educational purposes only. It does not constitute — and should not be construed as — financial advice, investment advice, legal advice, tax advice, or any other form of professional advice. Nothing on this site creates a professional advisory relationship between you and Lightning Path Partners. Business valuations, transaction structures, and market conditions discussed herein are general in nature and may not apply to your specific situation. Always consult a qualified financial advisor, M&A attorney, business broker, or CPA before making any business or financial decisions. Full Terms of Use →
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