Small business due diligence checklist for Australia

Start with the financial statements, but do not stop there. Smaller businesses often require buyers to reconcile several sources before they are comfortable that the reported earnings are real. In Australia, BAS summaries, bank data, payroll records, and general ledger extracts can all help validate the story.

Pay close attention to owner add-backs, margins, debtor quality, seasonality, and whether working capital needs are higher than the listing implies. If the seller has underinvested in maintenance, staff, or systems, current earnings may overstate sustainable earnings.

Understand how the business wins customers, what percentage of revenue is repeat versus one-off, how concentrated the customer base is, and whether demand is stable or highly cyclical. A business with a good broker memo but weak customer diversity can fall apart very quickly after settlement.

In the Australian small business market, customer relationships are often more personal and less contractually locked in than buyers expect. Test how much revenue would remain if the owner left tomorrow.

Look at staff capability, rostering, process documentation, supplier dependencies, system maturity, and workflow bottlenecks. Many businesses work because the owner fills operational gaps manually. That is manageable if you are stepping in full time, but much riskier if you need a more delegated model.

If the business runs across multiple sites or relies on vehicles, machinery, or specialist equipment, inspect utilisation, maintenance discipline, and replacement needs as well.

In Australia, employee obligations matter. Review wages, awards or enterprise conditions where relevant, superannuation payments, leave balances, key staff retention risk, and whether the business is overly reliant on a single operator, estimator, sales lead, or relationship manager.

If contractors are important to the operating model, assess whether they are genuinely independent or whether the practical arrangement creates hidden employment risk.

Confirm legal structure, ownership, PPSR issues where relevant, lease tenure, assignment conditions, pending disputes, intellectual property ownership, privacy practices, and all sector-specific licences or approvals. A strong business can still be a poor acquisition if the lease is short or the key approval cannot be transferred.

For regulated sectors, verify who actually holds the licence or accreditation, how the regulator views a change of control, and whether there are any unresolved complaints, audits, or remediation items.

Clarify GST treatment, asset versus share sale implications, working capital assumptions, tax lodgement status, and whether there are any historic ATO issues or payment plans. These items often shape the transaction structure as much as the price does.

You should also understand what employee liabilities, entitlements, and accrued obligations will transfer or remain with the seller under the proposed deal structure.

A business can look attractive on paper and still become a poor acquisition if the handover is weak. Clarify training, introductions, process documentation, supplier transfer, customer communications, and how long the seller will remain available after completion.

Transition planning is especially important for businesses with strong local brand loyalty, owner-led sales, or operational know-how that sits in undocumented routines.