Business Due Diligence Checklist
Investment & Acquisition Review

Project Overview  •  Leadership Assessment  •  Market Analysis  •  Business Model & Strategy  •  Financial Analysis  •  Operational Assessment  •  Intellectual Property & Innovation  •  Risk Assessment  •  Legal & Compliance Review  •  Environmental, Social & Governance (ESG)  •  Customer & Stakeholder Analysis  •  Human Capital  •  Digital Presence & Marketing  •  Future Outlook & Opportunities  •  Current Status  •  Disclaimer  •  About

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Designed for business, CRE, AEC, Tech/AI and Natural Resources professionals as part of the earlier Mainframe, Mini/PC, CADD, Web, Mobile/Cloud revolutions.

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↑Project Overview

• Business Name ► [Enter the official registered business name]:
• Business Type ► [Specify industry sector and business model (SaaS, Manufacturing, Retail, etc)]:
• Legal Structure ► [Detail legal entity type (LLC, Corporation, etc) and jurisdiction]:
• Ownership Structure ► [Document ownership percentages and key shareholders]:
• Headquarters Location ► [Primary business location and any significant satellite operations]:
• Year Established ► [Founding date and key milestones in company history]:
• Core Products/Services ► [Concise description of primary offerings]:
• Total Valuation/Deal Size ► [Current valuation or acquisition price]:
• Investment Sought ► [Amount of funding being raised, if applicable]:
• Mission Statement ► [Company's stated purpose and vision]:

↑Leadership Assessment

Executive Team

• CEO/Founder ► [Name, background, years of experience]:
• Other C-Suite ► [Names, roles, expertise]:
• Board Members ► [Names, affiliations, strategic value]:

Management Depth

• Second-tier leadership strength ► [Evaluate depth and capabilities of VP/Director level management]:
• Succession planning status ► [Document formal succession plans for key positions]:
• Key person dependencies and risk mitigation ► [Identify critical personnel and contingency plans]:

Track Record

• Previous ventures and outcomes ► [Detail founders' prior business experience and results]:
• Industry recognition and achievements ► [List awards, media coverage, and industry accolades]:
• References from industry peers or previous investors ► [Summarize feedback from professional references]:

Team Culture

• Decision-making processes ► [Describe how strategic and operational decisions are made]:
• Communication style and transparency ► [Assess information flow within organization and to stakeholders]:
• Adaptability to market changes ► [Evaluate historical response to market shifts and disruptions]:

↑Market Analysis

• Total Addressable Market (TAM) ► [Size in revenue and growth rate]:
• Serviceable Available Market (SAM) ► [Realistic portion company can target]:

Market Trends

• Growth drivers and inhibitors ► [Identify factors accelerating or limiting market growth]:
• Regulatory influences ► [Document relevant regulations impacting the industry]:
• Technological disruptions ► [Describe emerging technologies affecting the market]:
• Consumer behavior shifts ► [Detail changing customer preferences and habits]:

Competitive Landscape

• Direct competitors and market share ► [List primary competitors and relative market positions]:
• Indirect alternatives ► [Identify substitute products/services and alternative solutions]:
• Barriers to entry ► [Analyze factors protecting market from new entrants]:
• Competitive advantages and moats ► [Detail sustainable differentiators and defensible positions]:

Customer Analysis

• Target customer profiles ► [Define ideal customer segments and personas]:
• Customer acquisition costs ► [Calculate average cost to acquire new customers by channel]:
• Retention rates and lifetime value ► [Document customer longevity and total revenue generation]:
• Geographic and demographic distribution ► [Map customer concentration by location and characteristics]:

↑Business Model & Strategy

Revenue Model

• Primary revenue streams ► [Detail all sources of revenue and their relative importance]:
• Pricing strategy and rationale ► [Explain pricing model and competitive positioning]:
• Recurring vs one-time revenue ► [Analyze revenue stability and predictability]:
• Gross and net margins by product/service ► [Break down profitability by offering]:

Go-to-Market Strategy

• Distribution channels ► [Outline all methods used to deliver products/services to customers]:
• Marketing approach ► [Summarize key marketing strategies and channels]:
• Sales process and cycle length ► [Document typical sales journey from lead to close]:
• Strategic partnerships ► [Identify key alliances that drive customer acquisition or retention]:

Scalability Assessment

• Infrastructure requirements for growth ► [Detail physical and technological needs for expansion]:
• Operational bottlenecks ► [Identify constraints that could limit growth]:
• Technology stack scalability ► [Assess ability of current systems to handle increased volume]:
• Human capital scaling plan ► [Outline hiring needs and organizational structure for growth]:

Growth Strategy

• Organic growth initiatives ► [Detail plans for internal expansion and development]:
• M&A opportunities ► [Identify potential acquisition targets or merger partners]:
• Geographic expansion plans ► [Outline new market entry strategy and timeline]:
• Product/service line extensions ► [Describe planned additions to current offerings]:

↑Financial Analysis

Historical Performance

• 3–5 year revenue trends ► [Chart growth patterns and analyze seasonality]:
• Profitability metrics (Gross margin, EBITDA, Net income) ► [Track margin evolution and drivers]:
• Cash flow patterns ► [Analyze operating, investing, and financing cash flows]:
• Balance sheet strength ► [Assess asset quality, liability structure, and equity position]:

Financial Projections

• 3–5 year forward projections ► [Forecast key financial statements with supporting details]:
• Key assumptions underlying forecasts ► [Document critical variables driving projections]:
• Sensitivity analysis on critical variables ► [Test impact of changes to key assumptions]:
• Break-even analysis ► [Calculate volume and timeline to profitability]:

Capital Structure

• Current debt and equity mix ► [Detail existing financing and ownership]:
• Outstanding obligations ► [List all significant financial commitments]:
• Previous funding rounds ► [Document investment history and valuations]:
• Cap table analysis ► [Analyze ownership distribution and dilution implications]:

Investment Returns

• ROI/IRR projections ► [Calculate expected returns under various scenarios]:
• Payback period ► [Estimate time to recoup investment]:
• Exit opportunities and timeline ► [Identify potential acquirers and liquidity events]:
• Comparable transaction multiples ► [Benchmark against similar deals in the industry]:

↑Operational Assessment

Core Processes

• Production/service delivery workflow ► [Map key operational processes]:
• Quality control measures ► [Detail quality assurance systems and metrics]:
• Efficiency metrics and benchmarks ► [Compare operational performance to industry standards]:
• Continuous improvement initiatives ► [Document process optimization efforts]:

Supply Chain

• Key suppliers and dependencies ► [Identify critical vendors and concentration risks]:
• Inventory management ► [Assess inventory levels, turnover, and obsolescence]:
• Logistics infrastructure ► [Evaluate distribution network and fulfillment capabilities]:
• Resilience and redundancy measures ► [Document backup systems and contingency plans]:

Technology Infrastructure

• Proprietary systems ► [Detail custom software and technology assets]:
• Third-party dependencies ► [List critical external technology providers]:
• Cybersecurity measures ► [Evaluate data protection and security protocols]:
• Technical debt assessment ► [Identify outdated systems requiring replacement]:

Facilities & Equipment

• Owned/leased properties ► [Document real estate assets and obligations]:
• Major equipment assets ► [Inventory significant machinery and equipment]:
• Capacity utilization ► [Measure current usage against maximum capacity]:
• Maintenance requirements ► [Detail upkeep needs and replacement schedules]:

↑Intellectual Property & Innovation

IP Portfolio

• Patents (granted and pending) ► [List all patents with status and coverage]:
• Trademarks and copyrights ► [Document protected brands and creative works]:
• Trade secrets protection ► [Evaluate confidentiality measures for proprietary information]:
• Licensing agreements (in/out) ► [Detail all IP licensing arrangements]:

R&D Capabilities

• Innovation process ► [Describe approach to new product/service development]:
• R&D investment as % of revenue ► [Benchmark R&D spending against industry]:
• New product pipeline ► [List products in development with timelines]:
• Time-to-market metrics ► [Measure efficiency of innovation process]:

Technology Differentiation

• Unique technological advantages ► [Identify proprietary technology assets]:
• Competitive technological positioning ► [Compare technology stack to competitors]:
• Obsolescence risks ► [Assess vulnerability to technological disruption]:
• Innovation roadmap ► [Detail planned technology investments and upgrades]:

↑Risk Assessment

Market Risks

• Competitive threats ► [Identify emerging competitors and market shifts]:
• Market saturation concerns ► [Evaluate addressable market limitations]:
• Changing customer preferences ► [Track evolving customer needs and expectations]:
• Economic sensitivity ► [Assess impact of economic cycles on business]:

Operational Risks

• Production/delivery vulnerabilities ► [Identify potential disruption points]:
• Key person dependencies ► [Document critical skill or knowledge concentration]:
• Supply chain fragilities ► [Evaluate supplier concentration and alternatives]:
• Quality control challenges ► [Assess product/service consistency issues]:

Financial Risks

• Cash flow sustainability ► [Analyze working capital needs and liquidity]:
• Debt obligations ► [Review covenant compliance and refinancing requirements]:
• Foreign exchange exposure ► [Quantify currency risk and hedging strategies]:
• Capital access limitations ► [Assess ability to secure additional funding]:

Regulatory & Compliance Risks

• Industry-specific regulations ► [Identify key regulatory frameworks]:
• Pending legislation impact ► [Evaluate potential effects of proposed laws]:
• Compliance history ► [Review past violations or regulatory issues]:
• Environmental considerations ► [Assess ecological impact and sustainability]:

Mitigation Strategies

• Insurance coverage ► [Detail policies and coverage limits]:
• Contingency planning ► [Document crisis response procedures]:
• Diversification efforts ► [Evaluate revenue stream and supplier diversity]:
• Monitoring systems ► [Describe risk detection and early warning mechanisms]:

↑Legal & Compliance Review

Corporate Documentation

• Articles of incorporation/organization ► [Verify foundational legal documents]:
• Bylaws/operating agreements ► [Review governance structure and procedures]:
• Board minutes and resolutions ► [Examine decision history and authorization]:
• Shareholder agreements ► [Analyze rights, restrictions, and obligations]:

Material Contracts

• Customer agreements ► [Review major client contracts and terms]:
• Supplier contracts ► [Examine vendor relationships and commitments]:
• Partnership agreements ► [Analyze strategic alliance terms]:
• Employment contracts ► [Review key employee agreements and obligations]:

Litigation History

• Past, current, and threatened litigation ► [Document all legal disputes]:
• Settlement agreements ► [Review terms of resolved legal matters]:
• Judgments and liens ► [Identify outstanding legal obligations]:
• Dispute resolution mechanisms ► [Evaluate conflict management processes]:

Regulatory Compliance

• Required licenses and permits ► [Verify all necessary authorizations]:
• Compliance audit results ► [Review findings from regulatory examinations]:
• Regulatory correspondence ► [Document communication with authorities]:
• Remediation efforts for any violations ► [Track resolution of compliance issues]:

↑Environmental, Social & Governance (ESG)

Environmental Impact

• Resource consumption metrics ► [Measure energy, water, and material usage]:
• Waste management practices ► [Document recycling and disposal procedures]:
• Carbon footprint ► [Quantify greenhouse gas emissions]:
• Sustainability initiatives ► [Detail efforts to reduce environmental impact]:

Social Responsibility

• Labor practices ► [Evaluate employee treatment and workplace conditions]:
• Community engagement ► [Document charitable and community activities]:
• Diversity and inclusion metrics ► [Measure workforce representation]:
• Supply chain ethics ► [Assess vendor labor and environmental practices]:

Governance Structure

• Board composition and independence ► [Analyze board structure and autonomy]:
• Executive compensation alignment ► [Evaluate pay-for-performance linkage]:
• Shareholder rights ► [Review voting rights and shareholder protections]:
• Ethical business practices ► [Assess code of conduct and enforcement]:

↑Customer & Stakeholder Analysis

Customer Base

• Customer concentration ► [Identify revenue percentage from top clients]:
• Retention metrics ► [Measure customer loyalty and churn]:
• Satisfaction scores ► [Document customer feedback and satisfaction]:
• Reference accounts ► [List marquee clients willing to provide references]:

Strategic Relationships

• Key partnerships ► [Detail critical business alliances]:
• Channel relationships ► [Document distribution and reseller networks]:
• Industry alliances ► [Identify membership in consortia or associations]:
• Government relationships ► [Detail public sector connections and contracts]:

Reputation Assessment

• Brand perception research ► [Summarize market research on brand image]:
• Social media sentiment ► [Analyze online reputation and engagement]:
• Industry standing ► [Document thought leadership and industry influence]:
• Crisis management history ► [Review past reputation challenges and responses]:

↑Human Capital

Workforce Analysis

• Headcount by department ► [Break down staffing by functional area]:
• Skill distribution ► [Map employee capabilities and expertise]:
• Compensation benchmarking ► [Compare pay scales to industry standards]:
• Turnover rates ► [Measure employee retention by department]:

Culture Assessment

• Employee engagement metrics ► [Document satisfaction and engagement scores]:
• Values alignment ► [Evaluate consistency between stated and actual values]:
• Work environment ► [Assess workplace conditions and atmosphere]:
• Remote/hybrid work policies ► [Detail flexible work arrangements]:

Talent Development

• Training programs ► [Document employee development initiatives]:
• Career advancement opportunities ► [Describe internal promotion pathways]:
• Leadership development ► [Detail management training programs]:
• Knowledge management ► [Evaluate systems for preserving institutional knowledge]:

Recruitment & Retention

• Hiring processes ► [Document recruitment procedures and effectiveness]:
• Onboarding effectiveness ► [Assess new employee integration]:
• Retention strategies ► [Detail programs to maintain key talent]:
• Succession planning ► [Review leadership continuity plans]:

↑Digital Presence & Marketing

Brand Positioning

• Brand architecture ► [Document brand hierarchy and relationships]:
• Value proposition clarity ► [Evaluate messaging consistency and impact]:
• Competitive differentiation ► [Assess brand distinctiveness in market]:
• Brand equity assessment ► [Measure brand value and recognition]:

Digital Footprint

• Website analytics ► [Review traffic, engagement, and conversion metrics]:
• Social media presence and engagement ► [Evaluate following and interaction]:
• SEO performance ► [Assess search visibility and ranking]:
• Mobile optimization ► [Evaluate user experience across devices]:

Marketing Effectiveness

• Channel performance ► [Measure ROI by marketing channel]:
• Campaign ROI ► [Calculate return on marketing investments]:
• Customer acquisition costs ► [Compare acquisition cost by channel]:
• Content strategy assessment ► [Evaluate content quality and engagement]:

Customer Journey

• Touchpoint mapping ► [Document all customer interactions]:
• Conversion funnel analysis ► [Track progression from awareness to purchase]:
• Customer experience metrics ► [Measure satisfaction at each journey stage]:
• Feedback incorporation process ► [Evaluate response to customer input]:

↑Future Outlook & Opportunities

Growth Catalysts

• Emerging market opportunities ► [Identify untapped market segments]:
• Product/service expansion potential ► [Evaluate new offering possibilities]:
• Cross-selling/upselling capacity ► [Assess additional revenue from existing customers]:
• Strategic partnership possibilities ► [Identify potential alliance opportunities]:

Innovation Roadmap

• Planned product developments ► [Detail product pipeline and timelines]:
• Technology adoption timeline ► [Map implementation of new technologies]:
• Disruptive potential assessment ► [Evaluate capacity to transform market]:
• R&D priorities ► [Document focus areas for innovation investment]:

Expansion Opportunities

• Geographic market entry plans ► [Detail target regions and entry strategy]:
• Vertical integration possibilities ► [Identify supply chain control opportunities]:
• Horizontal diversification options ► [Evaluate related market opportunities]:
• Acquisition targets ► [List potential companies for purchase]:

Industry Positioning

• Thought leadership potential ► [Assess ability to influence industry direction]:
• Industry trend alignment ► [Evaluate positioning relative to market trends]:
• Adaptability to disruption ► [Measure resilience to industry changes]:
• Competitive trajectory ► [Project future market position]:

↑Current Status

Deal Progress

• Current stage in transaction/investment process ► [Document where deal stands]:
• Due diligence timeline ► [Detail schedule for completing review]:
• Critical path items ► [Identify must-resolve issues before closing]:
• Decision milestones ► [List key decision points and dates]:

Open Issues

• Unresolved questions ► [Document outstanding information needs]:
• Information gaps ► [Identify missing data or documentation]:
• Areas requiring deeper investigation ► [List topics needing further review]:
• Red flags requiring resolution ► [Detail potential deal-breakers]:

Key Stakeholder Positions

• Management alignment ► [Assess leadership team's support for transaction]:
• Board perspectives ► [Document director viewpoints on deal]:
• Investor sentiments ► [Summarize existing investor feedback]:
• Customer/partner feedback ► [Gauge external stakeholder reactions]:

Next Steps

• Priority actions ► [List immediate next steps]:
• Responsibility assignments ► [Designate owners for each action item]:
• Timeline for completion ► [Set deadlines for remaining tasks]:
• Red flags requiring resolution ► [Detail potential deal-breakers]:

↑DISCLAIMER

Neither Prosper Systems (PS), nor its Founder, Kenton H Johnson, are licensed Real Estate or Lending Brokers, Securities Dealers or Investment Advisers. However, PS has an Attorney on its Team, and works closely with and engages other licensed individuals or firms as needed. This Checklist is for guidance and educational purposes only and is not intended to be comprehensive or to constitute legal, financial, or technical advice. PS makes no warranties or representations as to the completeness or currency of information contained herein.

↑ABOUT Prosper Systems

Prosper Systems, led by Kenton H Johnson, is a team of Business, Sales and Technical Operations Consultants who have the resources and talents to work with projects and businesses that are or will be worth us$2M to $20M+, to facilitate: Finance as Capital Consultants ala Startup Steps, or Sale as Collaborators ala Sales.  Prosper Systems is continuing to Collaborate with more Companies, Collaborators and Capital ala More Resources. Referrers are well compensated.

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