The Australian Business Buyer’s 30-Point Pre-Acquisition Checklist

Buying an established business is not simply purchasing its historical profit. The buyer is acquiring a future stream of cash flows together with the employees, customers, suppliers, assets, contracts, systems, obligations and risks required to produce them.

An attractive information memorandum may help identify an opportunity, but it should not be treated as evidence that the business is suitable, profitable or fairly priced. Its purpose is to market the business.

The buyer’s first responsibility is to independently test the claims supporting the proposed transaction.

This 30-point checklist is designed for the preliminary review conducted after receiving sufficient information from the seller but before committing substantial professional costs or entering a binding transaction.

It does not replace formal financial, legal, taxation, employment, commercial, technical or operational due diligence. Instead, it helps buyers:

organise the initial investigation;
identify missing information;
test whether reported earnings appear sustainable;
understand the main operational and financial risks;
determine whether the asking price appears supportable; and
decide whether the opportunity deserves deeper investigation.

Australian Government guidance recommends examining the business’s financial records, operations, legal documents, licences, leases, assets, inventory and liabilities. It also recommends independently reviewing three to five years of financial information. Australian Government guidance on buying an existing business

How to use this checklist

Assess every point using one of the following statuses:

Green — supported: Sufficient information supports the preliminary conclusion.
Amber — unresolved: The issue may be manageable, but further evidence is required.
Red — unacceptable: The issue could materially affect value, financing, risk or the decision to proceed.

For each point, record:

the evidence received;
the buyer’s preliminary conclusion;
outstanding questions;
the potential financial or operational impact;
the person responsible for following up; and
whether the issue affects price, transaction terms or the decision to proceed.

Do not average the results into a single score without judgment. One critical issue—such as a non-transferable licence, major customer loss or unsupported earnings—can outweigh several positive findings.

Buyer objectives and ownership readiness

1. Define why you want to acquire a business

The acquisition should have a clear purpose. Possible objectives include replacing employment income, building long-term wealth, entering a new industry, acquiring a strategic capability or expanding an existing company.

Practical test: Write a one-paragraph ownership thesis explaining what you want to acquire, why you are qualified to own it and what success would look like after three to five years.

Establish:

the income and return required;
the preferred level of involvement;
the intended ownership period;
the buyer’s growth ambitions; and
the amount of personal capital at risk.

Pause if: The attraction is primarily escaping employment, following a trend or assuming that any profitable business will remain profitable under new ownership.

2. Establish acquisition criteria and deal breakers

Define the acceptable opportunity before reviewing listings. Otherwise, the search can be driven by whichever business is presented most persuasively.

Your criteria should include:

preferred sectors;
location;
enterprise-value range;
minimum maintainable earnings;
recurring-revenue characteristics;
customer concentration limits;
acceptable owner dependence;
capital-expenditure requirements;
regulatory exposure; and
industries or business models you will avoid.

Practical test: Separate criteria into required, preferred and unacceptable.

Pause if: You repeatedly relax critical criteria to justify a particular opportunity.

3. Determine your total financial capacity

Available equity is not the same as the maximum purchase price.

Estimate the total funding required for:

purchase consideration;
inventory;
working capital;
professional fees;
lender fees;
stamp duty or other applicable transaction costs;
immediate repairs or capital expenditure;
technology and systems;
personal living costs; and
a post-settlement liquidity buffer.

Practical test: Prepare a complete sources-and-uses schedule under base and downside scenarios.

Pause if: The transaction would use nearly all available liquidity, depend on an uncertain future asset sale or require immediate distributions from the business to meet the buyer’s personal commitments.

4. Confirm your operational readiness

Assess what the business will require from its owner during the first year.

Consider:

expected working hours;
required technical knowledge;
employee-management responsibilities;
travel;
customer-development requirements;
licences or qualifications;
family support;
health and personal resilience; and
the consequences of earning less than expected.

Practical test: Compare the seller’s current responsibilities with the work you are willing and able to perform.

Pause if: The acquisition relies on you immediately performing several unfamiliar roles without capable management support.

Business model, market and seller

5. Explain how the business makes money

A buyer should be able to explain the business model in plain language.

Identify:

who pays the business;
what customers purchase;
why they purchase it;
how frequently they buy;
how prices are set;
the direct cost of delivery;
how customers are acquired;
what drives gross profit; and
what could interrupt revenue.

Practical test: Describe the complete journey from lead generation to customer payment on one page.

Request: Product-level or service-level sales, volumes, prices and gross margins.

Pause if: Revenue growth cannot be connected to customer demand, pricing, volume and cash collection.

6. Assess industry demand and regulatory exposure

Determine whether demand is durable, cyclical, discretionary, project-based or dependent on government policy.

Examine:

market growth;
economic sensitivity;
technological disruption;
barriers to entry;
substitute products or services;
labour availability;
supply-chain risk;
regulatory changes; and
licences or approvals required to operate.

The Australian Business Licence and Information Service can help identify relevant licences, regulations, council approvals and compliance requirements. Australian Business Licence and Information Service

Practical test: Identify the three external developments most capable of reducing earnings during the next three years.

Pause if: The investment case depends on an unsupported industry-growth forecast or assumes regulation will remain unchanged.

7. Test the competitive advantage

A business needs a reason for customers to choose it and continue choosing it.

Possible advantages include:

proprietary capability;
specialised employees;
switching costs;
trusted reputation;
exclusive distribution;
recurring contracts;
operational scale;
location;
intellectual property; or
superior service.

Practical test: Ask what would prevent a well-funded competitor from replicating the business.

Request: Customer-retention data, win-loss analysis, pricing history, competitor comparisons and evidence supporting market-share claims.

Pause if: The claimed advantage is simply “good relationships” held personally by the seller.

8. Examine why the owner is selling

Retirement, health, succession and changing personal priorities can be genuine reasons. They do not establish that the business is sound.

Ask:

Why is the owner selling now?
How long has the sale been planned?
Has the business previously been marketed?
What will the owner do after settlement?
Is the owner prepared to provide transition support?
Has investment been reduced before the sale?
Have any customers, employees or suppliers recently left?
Would the seller retain some exposure through vendor finance or an earn-out?

Practical test: Compare the explanation with recent financial performance, investment decisions and the seller’s proposed post-settlement activities.

Pause if: The explanation changes, important developments are disclosed gradually or the seller is unwilling to provide a reasonable transition.

Financial performance and quality of earnings

9. Verify three to five years of financial information

Do not rely solely on a broker-prepared summary or information memorandum.

Request:

accountant-prepared financial statements;
income-tax returns;
Business Activity Statements;
monthly profit and loss statements;
balance sheets;
cash-flow statements;
general-ledger details;
sales records;
accounts-receivable and payable reports;
payroll reports; and
bank statements where appropriate.

Practical test: Reconcile reported revenue and profit across the financial statements, tax returns, BAS, sales reports and bank activity.

Pause if: Important records are unavailable, unexplained differences remain or the seller relies heavily on spreadsheets that cannot be reconciled to source systems.

10. Test revenue quality

Break revenue down by:

customer;
product or service;
location;
salesperson;
recurring versus project work;
contracted versus uncontracted revenue;
new versus existing customers; and
price growth versus volume growth.

Review monthly revenue, not only annual totals.

Practical test: Determine how much of the latest year’s revenue a new owner could reasonably expect to retain without relying on unproven pipeline opportunities.

Pause if: Recent growth comes from one project, unusual discounting, temporary demand, acquisitions or revenue recognised before delivery.

11. Examine gross margins and operating cost drivers

Stable revenue does not guarantee stable earnings.

Analyse:

gross margin by product, service and customer;
labour utilisation;
material costs;
freight;
subcontractor costs;
supplier rebates;
overtime;
wastage;
discounts; and
rework or warranty costs.

Practical test: Recalculate gross profit using operational data, including volumes, prices and direct costs.

Request: Monthly gross-margin reports and explanations for material changes.

Pause if: Revenue is increasing while gross margins decline, or the business cannot reliably measure profitability by product, service or customer.

12. Reconstruct maintainable earnings

Reported EBITDA should be adjusted to estimate earnings sustainable under new ownership.

Examine:

owner remuneration;
family-member employment;
personal expenditure;
related-party rent;
one-off income and expenses;
government assistance;
underpaid or missing roles;
deferred maintenance;
unusually low marketing;
bad debts; and
costs expected to increase after settlement.

Practical test: Build a line-by-line bridge from reported EBITDA to seller-adjusted EBITDA and then to buyer-estimated maintainable EBITDA.

Every adjustment should be supported, consistently treated and unlikely to recur.

Pause if: The valuation depends on aggressive add-backs, future synergies or the buyer working without reasonable remuneration.

13. Review taxation, payroll and employment compliance

Determine whether historical profit has benefited from delayed or unpaid obligations.

Review:

BAS and GST reconciliation;
payroll tax where applicable;
PAYG withholding;
superannuation;
employee classifications;
applicable awards or agreements;
overtime and penalty rates;
leave balances;
contractor arrangements; and
known tax or employment disputes.

Transfer-of-business rules can affect employee service, entitlements and employment records. The treatment depends on the circumstances and should be reviewed by employment and legal advisers. Fair Work Ombudsman guidance on employee entitlements

Practical test: Compare payroll records with employment agreements, timesheets, awards and general-ledger expenses.

Pause if: Earnings depend on underpaid labour, incorrectly classified contractors or unresolved taxation and employee liabilities.

14. Assess cash conversion

EBITDA is not cash available to the buyer.

Reconcile EBITDA to operating cash flow by considering:

receivable collection;
inventory movements;
work in progress;
customer deposits;
supplier payments;
tax payments;
maintenance capital expenditure; and
other recurring cash requirements.

Practical test: Calculate how much cash the business produced after normal working-capital movements and essential capital expenditure for each of the previous three years.

Pause if: Profit grows while cash collection deteriorates, or cash flow relies on stretching suppliers and delaying expenditure.

Customers, suppliers, people and operations

15. Measure customer concentration and retention

Request anonymised information for the largest customers showing:

revenue;
gross profit;
tenure;
contract status;
payment terms;
recent sales trend;
responsible relationship manager; and
products or services purchased.

Practical test: Model the effect of losing each of the three largest customers.

Review concentration using gross profit as well as revenue.

Pause if: One customer has disproportionate influence, the relationship is informal or the customer is personally loyal to the seller.

16. Test contracts, backlog and pipeline

Separate:

signed contracts;
committed purchase orders;
cancellable backlog;
repeat but uncontracted work;
qualified pipeline; and
early-stage opportunities.

Review contract terms for:

expiry;
renewal;
termination;
minimum volumes;
pricing;
assignment;
change of control;
service levels; and
penalties.

Practical test: Rebuild the forecast using only revenue supported by credible evidence and realistic conversion assumptions.

Pause if: Forecast growth depends mainly on verbal opportunities, unprofitable contracts or agreements that may not transfer.

17. Assess supplier concentration and continuity

Identify the suppliers essential to the business.

Review:

percentage of purchases;
alternative suppliers;
contractual terms;
rebates;
minimum commitments;
payment terms;
exclusivity;
import exposure;
foreign exchange;
lead times; and
recent supply interruptions.

Practical test: Estimate the impact of losing the largest supplier or having its prices increase materially.

Pause if: Critical inputs come from a single source, favourable terms depend on the seller personally or suppliers have overdue balances that could affect continuity.

18. Map owner dependence

Document every responsibility performed by the seller:

sales;
quoting;
pricing;
customer relationships;
supplier negotiation;
employee management;
quality control;
technical delivery;
banking;
compliance;
systems administration; and
problem resolution.

Practical test: Assign each responsibility to the buyer, an existing employee, a new hire or the seller during transition. Estimate the replacement cost.

Pause if: The business cannot operate without the seller and the knowledge, relationships or processes are undocumented.

19. Assess employees and management depth

Request an anonymised employee schedule showing:

role;
tenure;
employment status;
remuneration;
superannuation;
leave balances;
award or agreement;
qualifications;
reporting line; and
notice period.

Identify:

key-person risk;
vacancies;
expected departures;
succession coverage;
employee morale;
reliance on contractors;
training gaps; and
management capability.

Practical test: Ask who could run the business for 30 days if the owner were unavailable.

Pause if: Critical employees are unaware of the sale, likely to leave or hold undocumented knowledge with no credible replacement plan.

20. Review processes, systems, data and cybersecurity

Determine whether the operating system belongs to the business or exists mainly in the owner’s memory.

Review:

documented procedures;
accounting systems;
customer relationship management;
inventory systems;
access controls;
backups;
cybersecurity practices;
privacy controls;
reporting;
website and domain ownership;
software licences; and
business-continuity arrangements.

Practical test: Select three critical activities and determine whether another employee could perform them using documented procedures and authorised system access.

Pause if: Important data is stored in personal email accounts, shared passwords, unsupported software or systems owned by the seller personally.

Working capital, assets and capital expenditure

21. Determine normal working capital

A buyer needs enough working capital to operate the business after settlement.

Review monthly:

trade receivables;
trade payables;
inventory;
work in progress;
accrued expenses;
customer deposits; and
prepayments.

Identify seasonal peaks and unusual year-end balances.

Practical test: Calculate a normal working-capital range based on representative monthly balances—not only the latest balance sheet.

Pause if: The proposed transaction assumes minimal working capital despite material seasonality, slow-paying customers or increasing inventory.

22. Test the quality of receivables, inventory and work in progress

Examine receivables by age and identify:

disputed invoices;
overdue balances;
related-party amounts;
doubtful debts; and
post-reporting-date collections.

Review inventory for:

ageing;
damage;
obsolescence;
ownership;
consignment arrangements;
valuation method; and
saleability.

For work in progress, verify the stage of completion, remaining costs and customer acceptance.

Practical test: Apply realistic recovery or saleability discounts rather than accepting book value.

Pause if: A material portion of working capital is old, disputed, obsolete or difficult to verify.

23. Inspect assets, leases and maintenance capital expenditure

Request:

a fixed-asset register;
ownership records;
equipment-finance agreements;
service and maintenance history;
lease documents;
insurance records;
remaining useful-life estimates; and
a three-year capital-expenditure forecast.

Physically inspect material assets where appropriate.

Search the Personal Property Securities Register to identify relevant security interests affecting assets or the seller. The PPSR allows buyers to check whether another party may have an interest or legal claim over goods or assets being acquired. PPSR guidance for buyers

Practical test: Separate maintenance expenditure required to sustain current earnings from growth expenditure.

Pause if: Important assets are leased, financed, owned by another entity, approaching replacement or excluded from the proposed sale.

Valuation, financing and transaction structure

24. Establish an independent valuation range

Begin with buyer-estimated maintainable earnings, not the asking price.

Consider:

earnings sustainability;
cash conversion;
customer concentration;
owner dependence;
management depth;
capital intensity;
competitive position;
industry risk;
growth prospects; and
comparable transactions.

Use more than one valuation approach where appropriate, such as:

maintainable-earnings multiples;
discounted cash flow;
asset value; and
relevant market evidence.

Practical test: Calculate a valuation range under conservative, base and stronger-performance cases.

Pause if: The price is justified only by the seller’s forecast, a broker’s unsupported multiple or potential improvements the buyer must create.

25. Stress-test the acquisition

Model downside scenarios including:

a 10%–15% revenue decline;
loss of the largest customer;
gross-margin compression;
wage increases;
slower customer payments;
higher supplier costs;
additional capital expenditure;
delayed transition;
increased interest costs; and
the buyer requiring additional management support.

Practical test: Determine whether the business could still meet operating obligations and financing commitments without emergency equity.

Pause if: A modest decline would create a cash shortfall, covenant pressure or inability to pay the buyer reasonable remuneration.

26. Build the complete financing plan

The funding plan should cover more than the purchase price.

Include:

buyer equity;
senior debt;
vendor finance;
earn-out obligations;
transaction costs;
inventory;
working capital;
immediate capital expenditure; and
liquidity reserves.

Assess:

interest and principal payments;
security and personal guarantees;
repayment profile;
lender conditions;
refinancing exposure;
financial covenants; and
downside debt-service capacity.

Practical test: Obtain an informed indication of financing capacity before making an unconditional commitment.

Pause if: The transaction requires optimistic forecasts, maximum leverage or immediate distributions to remain solvent.

27. Select an appropriate transaction structure

Clarify whether the proposal involves:

purchasing business assets;
purchasing shares in the operating company;
acquiring selected assets;
purchasing inventory separately;
assuming specified liabilities; or
using staged consideration.

Consider how risk may be allocated through:

conditions precedent;
working-capital adjustments;
completion accounts;
warranties;
indemnities;
holdbacks;
escrow;
earn-outs;
vendor finance; and
seller transition obligations.

Asset and share transactions can have materially different legal, taxation and liability consequences. Obtain appropriately qualified advice before choosing or agreeing to the structure.

GST treatment also requires advice. A business sale may qualify as a GST-free supply of a going concern only when the relevant statutory conditions are met. Australian Taxation Office guidance

Practical test: Identify which risks should change the price and which should instead be addressed through transaction terms.

Pause if: The proposed structure transfers unclear liabilities or relies on tax assumptions that have not been professionally reviewed.

Due diligence, legal ownership and transition

28. Verify legal identity, ownership and regulatory rights

Confirm:

the seller’s legal identity;
ABN and GST status;
company and business-name details;
ownership of assets;
ownership of intellectual property;
licences and permits;
premises lease;
material contracts;
disputes and litigation;
insurance;
privacy obligations; and
environmental or industry-specific requirements.

Use ABN Lookup to check public ABN, entity-type and GST information, and use ASIC’s registers to verify relevant company and business-name information.

Do not assume that a business name establishes ownership of the underlying brand or trade mark. IP Australia states that trade-mark ownership requires a transfer agreement between the current and proposed owners, followed by recording the assignment. IP Australia trade-mark assignment guidance

If the business is a franchise, check the Franchise Disclosure Register and obtain specialist franchise advice.

Practical test: Create a schedule showing every material asset, contract, licence and right, its legal owner and the mechanism required to transfer it.

Pause if: The seller cannot establish ownership, critical rights are non-transferable or the business depends on informal arrangements.

29. Define the formal due-diligence plan and conditions

The preliminary review should lead to a targeted formal investigation.

Create separate workstreams for:

financial and quality of earnings;
taxation;
legal and contractual;
employment;
commercial and market;
operations;
technology and cybersecurity;
property and lease;
insurance;
environmental matters; and
industry-specific compliance.

For every material risk, determine:

evidence required;
responsible adviser;
due date;
financial impact;
probability;
possible mitigation; and
effect on price or transaction terms.

Any indicative offer or heads of agreement should be prepared with legal advice and clearly address matters such as confidentiality, exclusivity, access to information, financing, due-diligence satisfaction and the intended binding or non-binding effect.

Practical test: Do not commence expensive broad due diligence until the preliminary review identifies a credible investment case and an acceptable indicative valuation range.

Pause if: The seller requires an unconditional commitment before providing information necessary to test the investment case.

30. Prepare the transition and first 100 days

The acquisition does not end at settlement.

Prepare a transition plan covering:

seller handover;
customer communication;
employee retention;
supplier continuity;
banking authorities;
payroll;
insurance;
licences;
system access;
cybersecurity;
cash controls;
management reporting;
working capital;
operational responsibilities; and
the first 100 days.

Identify what must happen:

before signing;
before settlement;
on settlement day;
during the first week;
during the first month; and
within the first 100 days.

Practical test: Name the person responsible for every critical transition action and confirm that the required information, authority and resources will be available.

Pause if: The buyer intends to make major changes immediately without first protecting customers, employees, cash flow and operating continuity.

Converting the checklist into a decision

After completing the 30 points, prepare a short preliminary acquisition memorandum containing:

Acquisition thesis: Why the opportunity fits the buyer.
Business-quality assessment: The durability of revenue, margins and competitive position.
Maintainable-earnings range: A bridge from reported to buyer-estimated earnings.
Cash-flow assessment: Working capital and capital-expenditure requirements.
Indicative valuation range: Conservative, base and stronger-performance cases.
Financing capacity: Base and downside debt-service analysis.
Principal risks: The five issues most capable of changing the decision.
Outstanding evidence: Information required before proceeding.
Transaction protections: Matters potentially affecting price, conditions or structure.
Recommendation: Reject, monitor, request further information or proceed to formal due diligence.

A business does not need to be perfect. It needs to be understandable, appropriately priced and compatible with the buyer’s financial and operational capacity.

Some risks can be addressed through price or transaction terms. Others—such as unsupported earnings, non-transferable rights or a business that cannot function without the seller—may undermine the acquisition thesis entirely.

The purpose of this checklist is not to create certainty where none exists. It is to help buyers identify important questions early, demand evidence and make a deliberate decision before becoming financially or emotionally committed.

Key takeaway

A disciplined acquisition process moves in a clear sequence:

Buyer fit → business quality → sustainable earnings → cash flow → valuation → financing → due diligence → transaction structure → ownership readiness

Skipping a stage does not eliminate its risks. It usually transfers them to the buyer after settlement, when they are more expensive and difficult to correct.

The most successful preliminary review is not necessarily one that results in an acquisition. It is one that helps the buyer recognise whether the opportunity is worth pursuing—and provides the discipline to walk away when the evidence does not support the transaction.

This checklist provides general educational information only. It does not constitute financial product advice, investment advice, legal advice, taxation advice, accounting advice, credit assistance, business-broking advice or a recommendation to acquire any business. The appropriate investigations and transaction structure depend on the buyer, seller, business, industry and circumstances. Obtain appropriately qualified professional advice and conduct your own investigations before making a transaction decision.