Key Takeaways
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Due diligence tests the seller's claims against independent records, not against the information memorandum.
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The buyer, accountant and solicitor each verify different things, and agreeing the split early keeps the work organised.
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Financial checks come first because they test whether the price holds and whether finance may be approved.
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Lease, staff, licence and contract checks confirm whether the business can keep trading under a new owner.
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Findings can lead to a price change, new conditions or withdrawal, depending on what the contract allows.
A checklist tells a buyer what to collect. Due diligence is what happens next, testing each document against another source until the picture holds together or it does not.
For a buyer comparing businesses for sale on the Gold Coast, that work falls to the buyer, an accountant and a solicitor. It decides whether the price and terms hold.
Many owners appoint a business broker to handle the sale, so buyers often request records and raise follow-up questions through the broker rather than the seller. Knowing who holds which documents can keep verification moving within the agreed due diligence period.
What Due Diligence Verifies
Due diligence tests whether the business earns what the seller says it earns, whether it can keep trading under a new owner on the same terms, and whether there are liabilities or risks not visible in the sale documents.
Each test needs a different source of evidence. Earnings are tested with tax and bank records. Continuity is tested with the lease, licences, staff records and supplier agreements. Hidden risk is tested with searches, contract reviews and questions to the seller.
A Gold Coast business broker usually coordinates access to the seller's documents during the due diligence period and relays questions. The verification itself belongs to the buyer and the buyer's advisers.
Who Does What
Agree the split before the due diligence period starts, and use a business purchase checklist to settle which documents to request. Each party has a different role:
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The buyer visits the premises, observes trading, meets the seller, reviews the operation and decides what matters.
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The accountant reconciles financial records, tests adjustments to profit, checks tax lodgements and advises on structure and price.
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The solicitor reviews the contract, lease, licences, employment terms, searches and any disputes, and drafts special conditions.
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Specialists may be needed, such as an equipment technician, a lease adviser, an employment or payroll adviser, or a licensing consultant.
Keep a single list of questions and answers so the seller receives one organised request, not three.
Verifying the Financials
Financial verification has two parts. The first matches the figures to records the seller cannot easily adjust, and the second tests how profit has been restated:
Reconcile the Records
The summary figures in a listing or an information memorandum are a starting point, not evidence. Verification means matching them to independent records:
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Compare reported sales to business activity statement (BAS) lodgements and to bank deposits for the same periods.
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Compare point-of-sale or invoicing reports to the sales figures in the accounts.
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Compare supplier invoices and purchases to cost of goods sold.
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Check wages in the accounts against payroll records and superannuation payments.
Where the business handles cash, treat any income that does not appear in the bank records or the BAS with caution.
Test the Adjusted Profit
Listings often present an adjusted or normalised profit. Each adjustment needs a reason and a document. Adjustments can increase or reduce profit, so check for costs the seller has left out as well as personal expenses added back.
Common tests include three checks:
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Has the owner's wage been replaced with a market cost for the work they do?
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Does the rent reflect the lease you will inherit?
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Are the one-off items genuinely one-off?
Lease and Premises Checks
Have a solicitor review the lease's remaining term, options, rent review method, permitted use, outgoings, make-good obligations and the landlord's consent process for assignment.
Queensland retail shop lease rules may apply to some premises and can affect disclosure and timing. Where the Retail Shop Leases Act 1994 (Qld) applies and the lease is assigned as part of the sale, the seller must give the buyer an assignor disclosure statement and a copy of the current lease at least seven days before the buyer signs the business sale contract. Ask the solicitor to confirm what applies. Build landlord consent into the contract conditions, since a sale generally cannot settle without it.
Walk the premises with the equipment list in hand. Confirm what is owned, what is leased or financed and what belongs to the landlord. A search of the Personal Property Securities Register (PPSR) shows any registered security interests over equipment and stock.
Staff, Licences and Contracts
Ask for a schedule of employees showing role, employment type, award or agreement, pay rate, start date and accrued leave. An employment or payroll adviser can check classifications and rates. Under the Fair Work Act 2009 transfer of business rules, a new employer may need to recognise transferring employees' service and some accrued entitlements.
Confirm which licences, permits and registrations the business relies on, and whether each one transfers, needs a new application or is held personally by the seller. Food licences, trade licences, council approvals and liquor licence transfers each follow their own process. Do not assume a licence moves with the business.
Review customer, supplier and service contracts for assignment clauses, termination rights and change-of-control terms. A contract that cannot be assigned may need the other party's consent before settlement.
Company, court and insolvency searches, and a check of which entity owns the assets being sold, complete the legal picture.
Checking How the Business Runs
Documents cannot show whether a business works. Spend time on site at different times of the day and week. Watch how the team operates without the owner, how customers arrive, and how stock and orders move.
For a hospitality or retail business, ask how much of the trade depends on the owner's presence, which suppliers are on terms and whether the equipment will need replacing soon. The same questions apply when buying a cafe or takeaway, alongside sector-specific checks.
Ask the seller about customer concentration, seasonality, recent changes to trading and nearby competition, then compare the answers to the monthly figures.
Issues That Can Change the Deal
Issues that go to the earnings or the ability to trade are generally material. Issues that cost money to fix are often negotiable. Findings that may warrant closer review include:
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Sales that cannot be reconciled to BAS or bank records.
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Adjustments to profit without documents, or an owner wage left out.
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A lease with little term left, no option, or a landlord unwilling to consent.
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Staff paid below the applicable award or classified incorrectly.
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Licences held personally by the seller that a new owner cannot simply take over.
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Reluctance to provide records that any trading business would hold.
What to Do With the Findings
Once the results are in, the buyer can generally proceed as agreed, renegotiate the price, add or change conditions, or withdraw under the terms the contract allows.
Price adjustments often follow a verified earnings gap. Condition changes can suit issues that may be fixed before settlement, such as landlord consent, a licence application, equipment repairs or a staff entitlement adjustment. Have the solicitor record every agreed change in writing before the due diligence period ends.
Withdrawal may be appropriate where the earnings cannot be verified or the business cannot trade under a new owner on acceptable terms, subject to what the contract allows.
Test Every Claim
Before you sign, confirm with your solicitor how long the due diligence period runs and what the contract lets you do with the findings. Make sure your accountant has the records needed to start reconciling from the first day.
Bond Business Brokers can explain what information is available on each of its listings and what to request next.
Common Questions
How much can I check before signing a contract?
A buyer can usually review summary financials and the key lease terms, and inspect the premises, before signing a contract. Detailed records such as bank statements, payroll and supplier contracts are generally released once a contract is signed subject to a due diligence condition. Ask the broker what is available at each stage.
What if the seller will not provide a document I ask for?
Ask why, because some records do not exist in smaller businesses and an alternative source may cover the same information. If a core record such as BAS lodgements or the lease is refused, treat the gap as a finding. Have your solicitor advise on your position under the contract.
Can I speak to the landlord or staff during due diligence?
Generally not without the seller's agreement, as an unexpected approach can damage the business you are trying to buy. Landlord contact usually happens through the solicitors when consent to assign the lease is requested, and the seller can arrange a meeting if the lease terms need discussion.
This article provides general information only. Obtain advice from appropriately qualified advisers about your circumstances before entering into a transaction or relying on tax, legal or regulatory information.