Due Diligence Checklist for SaaS Buyers
Diligence is where deals slow down. This checklist shows what buyers ask for and how to organize evidence so you avoid last-minute retrades.
Table of contents
- Financial diligence
- Product and engineering diligence
- Customer and retention diligence
- Security and compliance diligence
- Examples: smooth vs rough diligence
- Action checklist
- Use the Smart Audit Tool for this
- FAQs
- Sources & further reading
- Related reading
Financial diligence
- ARR/MRR bridge by month
- Churn and NRR by cohort
- Gross margin and unit economics
- Revenue concentration analysis
Product and engineering diligence
flowchart TD
A[Codebase review] --> B[Tech debt assessment]
B --> C[Roadmap dependency]
C --> D[Infrastructure risk]
- Architecture overview
- Roadmap dependencies
- Incident history
Customer and retention diligence
- Top 20 customers and contract terms
- Churn by segment
- Pipeline quality
Security and compliance diligence
- SOC 2 or equivalent
- Data handling policies
- Security incident history
For newer founders
For newer founders
Start a data room early. Even a simple folder with monthly KPIs, contracts, and security docs reduces diligence friction.
For experienced founders
For experienced founders
Buyers want proof that the business can run without you. Document leadership roles, handoffs, and operational playbooks.
Examples: smooth vs rough diligence
Example 1: Smooth diligence
- Clean ARR bridge and churn cohorts
- Security policies documented
- Close completed in 90 days
Example 2: Rough diligence
- Revenue reconciliation issues
- Missing customer contracts
- Retrade on price and delayed close
Action checklist
- [ ] Prepare a monthly ARR bridge.
- [ ] Document churn definitions and cohorts.
- [ ] Build a security and compliance folder.
- [ ] Inventory contracts and SLAs.
- [ ] Assign owners for diligence Q&A.
Use the Smart Audit Tool for this
Scan your diligence narrative for red flags before buyers do.
Run the Smart Audit Tool: Audit your data room narrative
Pair with the Risk Assessment Tool for red-flag scoring.
FAQs
What do SaaS buyers look for in diligence? They focus on revenue quality, retention, customer concentration, and operational risk.
What documents are required? Financial statements, ARR bridges, churn cohorts, contracts, security policies, and product documentation are standard.
What are common red flags? Inconsistent metrics, high concentration, unresolved security issues, and founder dependency.
Sources & further reading
- KPMG – Tech M&A insights: https://kpmg.com
- PwC – M&A readiness: https://www.pwc.com
- SaaS Capital – Benchmarks: https://www.saas-capital.com/saas-benchmarks/
- Bessemer – State of the Cloud: https://www.bvp.com/cloud
- SaaStr – M&A lessons: https://www.saastr.com/