How Long Does Small Business Due Diligence Take?

We’ve all been there. You have a solid LOI signed, the buyer has "dry powder" ready to deploy, and the seller is mentally already on a beach in Cabo. Then, the drift sets in. Week 4 turns into Week 8. The buyer’s accountant asks for the same P&L breakdown for the third time. The seller starts getting "deal fatigue" and wondering if they should have entertained that other offer.

In the business brokerage world, time is the enemy of all deals.

The reality is that due diligence (DD) duration varies wildly based on deal complexity and preparation. However, having concrete benchmarks is the only way to herd the cats—keeping buyers focused and sellers sane.

The "Sweet Spot" for Deal Success

While every deal has its own heartbeat, industry data points to a specific "sweet spot" for success. According to brokerage firm Allan Taylor & Co, the average due diligence period for small business acquisitions lands between 45 to 60 days. They note that this window represents the balance between speed and thoroughness.

Why does this matter? Because time kills deals.

Research cited by Business-sale.com indicates that once a small business due diligence process drags past the 90-day mark, the probability of a successful closure drops to less than 50%. The longer the clock ticks, the more likely you are to face "re-trading" (where buyers lower their offer based on fatigue or minor findings) or external disruptions.

Typical Timelines by Deal Size

As brokers, we know that a Main Street coffee shop sale doesn't move at the same pace as a lower middle-market manufacturing plant. Here are the typical industry expectations for due diligence duration based on transaction size:

Deal Size	Typical Duration
Under $500K	3-4 weeks
$500K - $1M	4-6 weeks
$1M - $3M	6-8 weeks
$3M - $5M	8-10 weeks
Over $5M	10-12+ weeks

Note: Timelines assume a "clean" deal. Heavy "add-backs" or messy books will always push these to the right.

Timeline Factors: The Accelerators and The Brakes

You can usually predict if a deal will hit the 4-week or 12-week mark during the initial valuation. If the seller’s financials look like a shoebox of receipts, you're in for a long ride.

What Extends Due Diligence

Factor	Impact
Poor seller preparation	+2-4 weeks
Complex financials (messy add-backs)	+2-3 weeks
Multiple locations	+1-2 weeks
Real estate involved	+2-4 weeks
Environmental concerns	+4-8 weeks
Regulatory complexity	+2-4 weeks
Buyer inexperience (First-timers)	+2-3 weeks
Financing delays	+2-4 weeks

What Shortens Due Diligence

Factor	Impact
Data room ready (Day 1)	-1-2 weeks
Clean financials (GAAP/Reviewed)	-1-2 weeks
Experienced buyer	-1-2 weeks
Responsive seller	-1-2 weeks
Simple business model	-1-2 weeks

Industry Insight: Approximately 50% of business sales fall apart during due diligence, often due to "deal fatigue" or surprises in the financials, according to Coldstream Capital Partners.

Small Business Due Diligence Phase Breakdown

To keep the momentum, it helps to break the amorphous "due diligence" blob into distinct phases for your clients.

Phase 1: Setup (Days 1-5)

• The Goal: Open the floodgates.
• Key Activities: Data room access provided, initial document review, DD request list finalized, team introductions.
• Broker Tip: Ensure the seller knows that "Data Room Open" means everything needs to be there. Trickling in documents is a recipe for delays.

Phase 2: Initial Review (Days 6-15)

• The Goal: Validating the teaser.
• Key Activities: Document review begins, initial questions arise, financial analysis starts (Quality of Earnings), site visit scheduled.
• Common Friction: This is where buyers spot the first inconsistencies in the "add-backs."

Phase 3: Deep Dive (Days 16-30)

• The Goal: Assessing risk.
• Key Activities: Detailed financial analysis, legal review, operational assessment, follow-up questions.
• Status Check: If you aren't past the major financial hurdles by Day 30, the deal is in the danger zone.

Phase 4: Site Visit (Days 20-35)

• The Goal: "Kicking the tires" (literally).
• Key Activities: Facility tour, management meetings, equipment inspection, employee observations.

Phase 5: Resolution (Days 30-45)

• The Goal: The final handshake.
• Key Activities: Issues identified, negotiations on findings (re-trading prevention), purchase agreement refinement, lender requirements.

Phase 6: Closing Preparation (Days 40-60)

• The Goal: Ink on paper.
• Key Activities: Final approvals, closing documents, funding coordination, transition planning.

Keeping DD on Track

As a broker, your role shifts from "salesperson" to "project manager." You are the guardrail against deal drift.

Best Practices

Practice	Benefit
Set clear deadlines	Maintain momentum
Weekly status calls	Address issues quickly
Prioritize requests	Focus on critical items
Track outstanding items	Prevent delays
Escalate blockers	Remove obstacles

Common Delay Causes

Cause	Prevention
Missing documents	Prepare data room early (Pre-LOI).
Slow responses	Set response expectations (24-48 hour rule).
Scope creep	Define DD scope in LOI. Don't let tire kickers wander.
Lender issues	Start financing early.
Legal disputes	Engage M&A-specific attorneys early.

"Time kills deals. The longer due diligence drags on, the greater the risk of external disruptions... derailing the deal." — Rapid Diligence Source

LOI Duration Provisions

Don't let the LOI be vague. Ambiguity breeds procrastination.

Standard DD Period

• 30 days: Smaller, cash deals or asset sales.
• 45 days: Typical Main Street transactions.
• 60 days: Larger/complex deals (Lower Middle Market).
• 90+ days: Highly complex industries (Healthcare, Manufacturing with environmental).

Extension Provisions

Always protect the timeline while allowing for reasonable delays. Include extension language like:

"Buyer may extend the Due Diligence Period by up to 15 days upon written notice to Seller, provided Buyer is actively pursuing the transaction."