You're about to sign on the dotted line. The deal looks good. Everyone's excited. But have you actually done your homework?

Commercial due diligence isn't just a checkbox exercise. It's the difference between a smart investment and a very expensive mistake. Whether you're acquiring a company, entering a partnership, or investing serious capital, you need to know what you're really buying into.

Here are 10 things you absolutely must understand before you commit.

1. The Numbers Need to Tell the Whole Story

Those financial statements? Don't just glance at them. You need at least three years of audited financials, income statements, balance sheets, and cash flow statements. Look beyond the headline profit figure.

What's actually driving revenue? Where are the expenses going? Is the cash flow sustainable or are they burning through reserves? Companies can look profitable on paper while haemorrhaging cash. That's a red flag you can't ignore.

Pay particular attention to free cash flow generation. This tells you whether the business actually generates money or just moves it around on spreadsheets.

2. Customer Concentration Is Make-or-Break

Here's a question that should keep you up at night: What happens if their biggest client walks away tomorrow?

If 40% of revenue comes from two customers, you're not buying a business, you're buying a dependency. Assess customer retention rates, churn by segment, and how concentrated the revenue base really is.

Look at customer acquisition costs versus lifetime value. If they're spending £500 to acquire customers who only generate £300 in value, that's a business model with an expiration date.

3. The Competitive Landscape Matters More Than You Think

Every business says they have a "competitive advantage." Your job is to figure out if that's real or just wishful thinking.

Who are the main competitors? What are they doing better? Where does this company actually win, and where are they getting hammered? Market share data matters, but so does trajectory, are they gaining ground or losing it?

Most importantly: are the barriers to entry real? If a competitor with deeper pockets can replicate this business model in six months, you're not buying a moat. You're buying a head start that might already be over.

4. Operations Don't Lie

The financials show you what happened. Operations show you how it happened, and whether it can keep happening.

Review their internal processes. Where are the bottlenecks? What's manual that should be automated? What's held together with duct tape and hope? Manufacturing, distribution, sales processes, all of it needs scrutiny.

You're not just buying today's operations. You're buying tomorrow's scalability. If the business can't grow without falling apart, that's information you need before you sign anything.

5. Supply Chain Vulnerabilities Will Bite You

Supply chains are fragile. We've all learned that the hard way over the past few years.

Who are the key suppliers? What happens if they increase prices by 20%? What if they go under? Is there inventory sitting in warehouses, or is everything just-in-time with no buffer?

One supplier failure shouldn't tank the entire business. If it can, that's a risk you need to price into your offer, or walk away from entirely.

6. Legal and Regulatory Exposure Can Destroy Value Overnight

This is where a lot of deals go wrong. You're so focused on the opportunity that you miss the landmines.

Pending litigation? Environmental issues? Workplace safety violations? Intellectual property disputes? Regulatory compliance gaps? Any of these can turn your investment into a liability.

Don't take their word for it. Get independent legal and investigation support to identify what's really lurking beneath the surface. The cost of proper due diligence is nothing compared to the cost of walking into a regulatory mess.

7. Technology Infrastructure Needs a Health Check

The tech stack might seem secondary, but it's not. It's the backbone of modern business operations.

What systems are they running on? Are they using software from 2003 that hasn't been updated since? Is their data management a mess? How secure is their IT infrastructure, and does it integrate with yours?

If you're planning a merger or integration, incompatible systems can add millions to your post-deal costs. And if their cybersecurity is a joke, you're inheriting a ticking time bomb.

8. Sales and Marketing Effectiveness Tells You What's Coming

Revenue is great. But how are they getting it, and how much are they paying for it?

Customer acquisition costs should be significantly lower than customer lifetime value. If they're not, the growth you're seeing is probably unsustainable. Review their marketing ROI, pricing strategy, and sales conversion rates.

Ask the hard question: If you pulled all marketing spend tomorrow, would this business still generate revenue? If the answer is no, you're buying marketing effectiveness, not a self-sustaining business model.

9. Asset Valuations Must Be Current and Accurate

Don't assume the balance sheet tells the truth about asset values. Buildings, equipment, machinery, inventory, all of it needs professional appraisal.

That "state-of-the-art" manufacturing equipment might be worth half what they say it is. The property portfolio might be inflated. Inventory might be obsolete stock that no one wants to buy.

Get independent valuations. If the assets are worth less than stated, that changes your valuation of the entire deal.

10. The Business Plan Needs to Align With Reality, and Your Strategy

Everyone has a business plan. The question is whether it's remotely achievable.

Does the projected revenue growth match market realities? Are the cost assumptions reasonable? Does the go-to-market strategy actually make sense, or is it based on optimistic guesswork?

More importantly: does this business align with your own strategic objectives? If you're buying something that doesn't fit your portfolio or capabilities, you're setting yourself up for failure regardless of how good the target looks on paper.

Before You Sign, Ask One More Question

Here's the final test: Would you still do this deal if you couldn't sell it for five years?

If the answer is no, you're speculating, not investing. Due diligence isn't about finding reasons to say yes. It's about making sure you're not walking into something that only looks good from a distance.

Smart deals are built on information. Bad deals are built on hope. The difference is the quality of your due diligence.

Need expert support conducting commercial due diligence that actually protects your interests? We can help. Because the last thing you need is to discover problems after you've already signed.

Zazinga Group

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