Every buyer reads your financial statements. What they check after that depends on what your business actually does. A manufacturer, a distributor and a service company with the same earnings will face three different sets of questions, and the questions that slow a deal down are usually the ones specific to the industry. Knowing them in advance lets you answer them on your schedule rather than the buyer's.
1. Manufacturing: the machines, the spending and the site
In a manufacturing business, much of the value sits in physical assets, so a buyer looks hard at what it will have to spend after closing. Expect questions about the age and condition of major equipment, the maintenance records behind it, and how much has been invested in recent years compared with what the business really needs. If a buyer concludes that a key machine is near the end of its life, that cost tends to come off the price one way or another. The site matters too. Where the business owns or leases industrial property, the buyer, and often its lender, will usually want an environmental review before closing. And if customers require a quality certification, the buyer will confirm it is current and that the system behind it does not live in one person's head.
2. Distribution: the supplier lines and the terms behind them
A distributor's earnings rest on relationships at both ends: the customers it sells to and the manufacturers whose products it carries. Buyers often spend more time on the second group than owners expect. Which product lines are exclusive, and in which territory? Are the distribution agreements written down, and can the supplier end them or change the terms if ownership changes? A line that accounts for a large share of sales and rests on a handshake is a risk a buyer will price. Expect questions about vendor rebates and how they are booked, gross margin by product line, and stock that has not moved in a year or more.
3. Service: the people, the license and what keeps customers coming back
In a service business, the assets go home at five o'clock. A buyer wants to know who does the work, who the customers call, and what happens if those people leave. Many trades require a qualified individual to hold the state license the company operates under. If that individual is the owner, the buyer needs a plan for who holds it after closing, and that plan should exist before the sale rather than be invented during it. Buyers also look at technician tenure and turnover, how work is scheduled and priced, and whether recurring work is covered by written service agreements or rests on relationships that could walk away.
4. Different buyers dig in different places
The buyer type changes where diligence goes deepest. A competitor already knows your industry and goes straight to what worries it: which of your customers it already sells to, whether your key people will stay, and whether your supplier lines conflict with its own. A private equity group usually brings outside accountants and attorneys and works through the full list, with its lender reviewing alongside. An individual or family buyer often leans hardest on the transition, because it will be running the company itself, and its bank will set many of the requirements. The documents are the same. The questions they generate are not.
5. Build your industry's file before anyone asks
Most owners can assemble what a buyer will want, given time. The trouble is assembling it under a deadline, after a letter of intent is signed, while still running the company. A practical start, depending on your business:
Manufacturing: an equipment list with age, condition and maintenance history; a record of capital spending over the last several years; any environmental reports on the site; current certifications and the procedures behind them.
Distribution: a copy of every supplier agreement, a list of exclusive lines and territories, rebate history, and an aged inventory report.
Service: who holds each license and permit, the written customer agreements you have, technician tenure, and how jobs are priced.
Gaps found now can be fixed or explained. Gaps found by a buyer become part of the negotiation.
The takeaway
Financial statements tell a buyer what your business earned. The industry-specific questions tell it whether those earnings will continue under new ownership. Owners who know which questions their kind of business invites, and have the answers in a file, spend diligence confirming value rather than defending it.
