How to Prepare Your SaaS Company for Due Diligence

What Is Due Diligence?

Due diligence is the process investors or acquirers go through to verify everything you have told them about your business. It typically starts after a term sheet is signed and lasts 4–8 weeks.

A well-prepared data room can cut that timeline in half. A poorly prepared one can kill a deal — or give the buyer leverage to reduce the price.

The Due Diligence Checklist for SaaS Companies

Financial Documents

3 years of management accounts (P&L, balance sheet, cash flow)
Year-end accounts filed at Companies House
MRR schedule — full customer-level breakdown, reconciled to accounting records
Revenue recognition policy
Cap table — fully diluted share ownership including all options
Latest 12-month cash flow forecast
Bank statements for the last 12 months

Commercial Documents

All customer contracts — especially enterprise agreements with unusual terms
Churn analysis — why customers left, when, and what you did about it
Pipeline and ARR bridge — new, expansion, and churned MRR by month
Pricing history and its impact on MRR

Legal Documents

Certificate of incorporation and Articles of Association
Shareholder agreement
Employment contracts for all key employees
IP assignment agreements — especially for contractors who built the product
GDPR and data processing documentation

KPI Dashboard

MRR, ARR, churn, CAC, LTV, gross margin, net revenue retention
Customer count by tier and contract length
Monthly active users or usage metrics

The Most Common Due Diligence Failures

MRR does not reconcile to accounts — one-off income recorded as recurring, or deferred revenue handled incorrectly
Key customer concentration — one customer representing 20–30%+ of ARR is a red flag
IP ownership gaps — product built by contractors without proper IP assignment agreements
Inconsistent financial data — numbers in the deck do not match the management accounts

When Should You Start Preparing?

Ideally 6–12 months before you plan to raise or sell. Many issues that surface in due diligence take months to fix — especially revenue recognition, IP agreements, and chart of accounts structure.

A fractional CFO will audit your data room readiness in the first month of engagement and give you a clear action list of what needs fixing before you approach investors.

Frequently Asked Questions

How long does due diligence take for a SaaS company?

Typically 4–8 weeks for a Series A. M&A due diligence for a larger exit can take 3–6 months. A well-organised data room compresses timelines significantly.

What is a data room?

A secure online folder (Google Drive, Notion, or a dedicated tool like Datasite) where you share confidential documents with investors or buyers under NDA.

Written by Constantin Botnari, Chartered Accountant & Fractional CFO for SaaS, AI and tech founders in London & UK. Connect on LinkedIn.