We want to ensure we do not face unexpected price chips once we go to market. How do we use a mock due diligence process during our exit runway to identify and fix operational leaks before buyers find them?

Question

Tyler Smith · Accepted Answer

Waiting for a buyer's due diligence team to find the weaknesses in your business is a recipe for a discounted valuation or a collapsed deal. Sophisticated buyers will thoroughly audit your operations, contracts, and HR files. To protect your value, you must run a mock due diligence process at least twelve months before going to market.

Treat mock due diligence as a major initiative on your V/TO. Assign your leadership team the task of auditing every core department. Look for operational bleed, such as unwritten customer agreements, expired vendor contracts, outdated compliance filings, and incomplete employee files.

- Verify that all intellectual property is fully registered and owned by the entity.
- Ensure all key customer contracts have clear assignability clauses.
- Review your IT systems and data security protocols to ensure compliance with modern standards.

When you identify gaps, do not ignore them. Bring them to your weekly Level 10 Meeting and use the IDS process to solve them permanently. Documenting the resolution of these issues in a secure virtual data room prepares you for the real transaction.

Running this internal audit gives your leadership team the opportunity to clean up operational inefficiencies while you still have the runway to do so. When the actual buyers arrive, your organization will be organized, transparent, and completely prepared to defend your premium valuation.