Due diligence briefer

Due Diligence Briefer

Before you write a cheque, know what you're really buying. This skill transforms a business listing, broker memo, or seller-provided financials into a structured due diligence briefing with red flags, industry context, and negotiation ammunition.

Author: mloki23 | Pipeline: pairs with competitor-intel-briefer for pre-acquisition market context

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Minimum Required Inputs

Do not proceed without all 3:

1. Business name and industry — what they sell, who they serve
2. Key financials — at minimum: asking price, annual revenue, and claimed profit (EBITDA or SDE). If the user only has a listing URL, extract what's available and flag gaps.
3. Location — country at minimum; city/state for regional benchmarking

Ask for missing inputs before starting Phase 1. If the user provides a URL (e.g. business-for-sale listing), extract inputs from it first.

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Phase 1: Financial Stress Test (15-20 min)

Goal: Determine whether the asking price is reasonable and uncover financial red flags.

1.1 Calculate baseline valuation multiples

Compute using the figures the user provides:

Revenue multiple = Asking Price / Annual Revenue
Profit multiple = Asking Price / Annual Profit (EBITDA or SDE)

1.2 Research industry valuation multiples

Search for typical multiples for the specific industry:

[business industry] business valuation multiples [year]
[business industry] average EBITDA multiple small business
typical revenue multiple for [industry] sale

Cap at 3 searches for 1.2.

1.3 Flag valuation discrepancies

Compare the calculated multiples against industry averages:

• If asking price multiple is >1.5x the industry average: HIGH PREMIUM flag
• If profit multiple >5x for a small business (<$5M revenue): caution
• If seller isn't using a standard multiple (e.g., "asset value only" for a service business): flag the non-standard valuation method

1.4 Check for common financial red flags

Run these specific checks (web-searchable):

[A] "seller's discretionary earnings" OR "add-backs" red flags small business
[B] "working capital" adjustment business sale trap
[C] [industry] revenue concentration risk "customer concentration"

Cap at 3 searches for 1.4.

PROHIBITED during Phase 1: Do not make a buy/caution/pass assessment yet. Observation and calculation only.

Phase 1 Gate — DO NOT proceed until ALL checked:

• Revenue and profit multiples calculated
• Industry benchmark multiples found (at least 1 source)
• Discrepancy flagged if multiple exceeds 1.5x industry average
• Minimum 3 financial red flag areas checked (A, B, C above)
• Summary presented to user: "Here's what the numbers say so far — does this match what you expected?"

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Phase 2: Operational & Market Red Flags (15-20 min)

Goal: Uncover non-financial risks the seller isn't volunteering.

2.1 Customer and revenue risk

Search:

[industry] customer concentration risk small business
what happens when key customer leaves [industry] business

2.2 Owner dependency check

Search:

[industry] business owner dependency "key person risk"
buying a business where owner is the brand

2.3 Industry headwinds

Search:

[industry] outlook [current year] challenges risks
[industry] disruption technology regulatory threats

2.4 Competitive pressure check

Search:

[industry] new competitors entering market [current year]
[industry] losing market share to [alternative/disruption]

Cap at 5 searches total across 2.1-2.4.

2.5 Cross-check with competitor-intel-briefer

If the user has run competitor-intel-briefer for this industry, reference those findings. If they haven't, offer: "I can run a competitive intelligence briefing on this industry for deeper context — want me to?"

Phase 2 Gate:

• Customer concentration risk assessed
• Owner dependency risk assessed
• At least 1 industry headwind identified
• At least 1 competitive threat identified
• Red flags compiled into a numbered list presented to user

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Phase 3: Negotiation Position & Verdict (10-15 min)

Goal: Deliver the final briefing with a clear recommended action.

3.1 Build the negotiation ammunition list

From Phases 1-2, extract every weakness that weakens the seller's position:

• Over-market valuation
• Customer concentration above 30%
• Owner-is-the-business dependency
• Declining industry or new competitor threats
• Inflated add-backs in profit claims
• Missing working capital in deal structure

3.2 Research recent comparable sales

Search:

[industry] business sold for less than asking price [year]
[industry] business sale "deal fell through" OR "price reduced"

Cap at 2 searches.

3.3 Deliver the final briefing

Output format — save to due-diligence-[business-name]-[YYYY-MM-DD].md:

# Due Diligence Briefing: [Business Name]
**Date:** [YYYY-MM-DD] | **Status:** BUY / CAUTION / PASS

## The Numbers
| Metric | This Business | Industry Avg | Flag |
|--------|--------------|--------------|------|
| Revenue Multiple | X.Xx | X.Xx | [OK/HIGH] |
| Profit Multiple | X.Xx | X.Xx | [OK/HIGH] |
| [Revenue/Profit Trend if available] | | | |

## Red Flags (ranked by severity)
1. **[Red flag]** — [specific detail with source]
2. ...

## What The Seller Isn't Saying
*Pick the 2–3 most relevant to this deal — at least one must be supported by a specific finding:*
- **Walkout risk:** If the owner handles key relationships or is the public face, what revenue leaves with them?
- **Hidden capex:** Equipment age, lease renewals imminent, staff paid below-market (deferred cost bomb)
- **Market timing signal:** Why is the seller selling now — plateau, new competitor, regulatory headwind?
- **Concentration cliff:** What breaks if the top customer, supplier, or contract disappears?
- **Earn-out trap:** Is the asking price padded with performance milestones that depend on the seller's cooperation post-sale?

## Negotiation Ammunition
- [Specific weakness] → use this to push for [specific concession]
- ...

## Verdict: [BUY / CAUTION / PASS]
[2-3 sentence rationale referencing the strongest evidence]

## If Proceeding: First 3 Actions
1. [Specific — e.g., "Request last 3 years of tax returns, not just P&L"]
2. [Specific]
3. [Specific]

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*Researched via web search. Not financial or legal advice. Hire a
professional for the binding stuff.*

3.4 Ask the closing question

After delivering the briefing: "Want me to run a competitor-intel-briefer on this industry for deeper market context before you decide?"

Phase 3 Gate:

• Negotiation ammunition list has minimum 3 items
• Verdict (BUY/CAUTION/PASS) delivered with rationale
• Output saved to due-diligence-[name]-[date].md
• Closing question asked

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Prohibited Behaviours

Prohibited Action	Why
Skip financial ratio calculation	Without numbers, the verdict is opinion, not analysis
Exceed search caps (3/3/5/2 per phase)	Anti-loop — compile with what you have
Make a verdict without industry benchmarks	A multiple is meaningless without context
Present as financial advice	Always include the disclaimer — legal liability risk
Skip Phase gate checks	Gates prevent delivering half-researched verdicts
Use paid data sources or APIs	Web search only — this is our differentiator

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Quality Standards — Complete When:

• All 3 phases executed in sequence with every gate passed
• Revenue and profit multiples calculated and benchmarked
• Minimum 5 red flags checked across financial and operational dimensions
• Negotiation ammunition has 3+ items tied to specific findings
• Verdict is BUY, CAUTION, or PASS — never "it depends"
• Output file saved with correct naming convention
• Disclaimer included in output

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Australian-Aware

If the user provides an Australian business or ABN/ACN:

• Use AUD throughout (skip USD default)
• Search for Australian-specific benchmarks: "Australian [industry] valuation multiples", "small business sale Australia multiples"
• Check for Australian-specific traps: earn-out structures, vendor finance terms, GST on going concern, stamp duty on business assets (state-varying)
• Reference ATO small business benchmarks if relevant

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Context Budget

After Phase 1: retain only the calculated multiples, industry benchmarks, and flag list — discard raw search results. After Phase 2: retain only the numbered red flag list — discard individual search outputs. After Phase 3: the briefing file is the artifact. Nothing else from the session needs to be retained.