Financial Due Diligence Buyer’s Guide
What You’ll Learn in This Video The 5 key components of financial due diligence How to assess income statements and balance sheets Why working capital kills more deals than you think How to verify earnings through quality of earnings and proof of cash Real stories of deals gone wrong — and how to avoid them Why This Strategy Works These frameworks are used by SBA buyers, independent sponsors, and private equity teams. If you're buying a business, this process helps you: Avoid inflated earnings Set a clear working capital peg Spot hidden liabilities before closing Timestamps 0:00 – LOI→Close Timeline & Where Diligence Fits 1:06 – Tax & Legal Diligence: Roles & Timing 1:51 – Case Study: Justin’s SBA Acquisition Failure 5:06 – The Five Buckets of Financial Due Diligence 7:11 – Diligence Roadmap: 7-Step Process 11:04 – QoE Timeline: Adjusted EBITDA by Week 3–4 16:14 – Income Statement Review: Margins & Red Flags 21:20 – Balance Sheet Review: AR/AP & Debt-Like Items 25:23 – Working Capital: Biggest Deal Killer (Set It in the LOI) 37:56 – Proof of Cash/Revenue: Bank Tie-Outs Step-by-Step Breakdown Step 1: Understand the Deal Timeline Get a full view of the 90-day window from LOI to close. Know when diligence, legal, tax, and financing come into play. Step 2: Analyze Financials in Depth Review profit and loss and balance sheets for patterns, anomalies, and red flags. Step 3: Verify with Bank Data Use proof of cash to validate QuickBooks figures against actual deposits and disbursements. Step 4: Align Working Capital Early Set expectations with the seller during the LOI stage to avoid closing delays or deal failure. Step 5: Normalize Earnings with QofE Identify one-time expenses, discretionary owner costs, and out-of-period items to calculate true adjusted EBITDA. Final Thoughts and Call to Action Due diligence isn’t just about checking a box — it’s how smart buyers avoid costly mistakes. Comment checklist below to receive a free copy of the due diligence template used in real deals. Subscribe to the channel for future deep dives on deal structure, QofE, and more. 👍 Like this video if you found it helpful • Subscribe to Brick by Brick: https://blog.oconnelladvisorygroup.co... • A blog helping entrepreneurs and investors build wealth through ownership. 🔗 Are you an Entrepreneur or Investor looking for help with Financial Due Diligence? • Learn how I can help: https://tinyurl.com/5997x6u5 🔗 Learn more about our Business Buying Program • Apply today: https://tinyurl.com/yc4wsst8 📚Stop Climbing. Start Owning. Escape the 9-5. • Grab a copy of my e-book today: https://stan.store/SMBDealGuy/p/get-m... 👽Join the SMBAcqusiitonHub on Redditt • A community of over 100 entrepreneurs to help you Confidently Buy, Sell, and Operate Profitable Small Businesses. Join here: / smbacquisitionhub Patrick's Affiliate Recommendations: • 📚 # 1 Sales tool: I recently started using Reply.io and couldn't be more excited: https://get.reply.io/8gf8d20bsk57 • Time Tracking Software: https://appsumo.8odi.net/POm6BN • Kit: https://partners.kit.com/3ke2jpnjwcqt • #1 Personal Finance App: https://www.wealthfront.com/c/affilia... • Grow your business through authentic reviews (15% off for 12 months) : https://refer.testimonial.to/patrick-... ------Patrick O'Connell––– Social Media––– LinkedIn: / patrick-o-connell-3b235177 X: https://x.com/smbdealguy TikTok: / smbdealguy Instagram: / smbdealguy YouTube: / @patrick_oconnell
