You need comprehensive customer data for the Due Diligence process

I doubt there’s a single DD-process in which customer data isn’t playing a central role. Trying to compile this data during DD is not only time-consuming but, in many cases, close to impossible. Make sure you collect comprehensive customer-related data as early as possible.

Before DD begins, sellers naturally present customer information in the most favorable light possible. During the process, however, buyers dig deeper, wanting to see customer data from every possible angle.

Through Legal DD, buyers want to ensure customer contracts carry no hidden risks and comply with GDPR (e.g. DPA agreements). I won’t go further into Legal DD here, but make sure your customer contract documentation is up-to-date – and whatever you do, don’t leave this responsibility solely to your sales team.  

Ensure that all customer contract -related documentation is up-to-date. Whatever you do, don’t leave it on the sales team.

Other customer data requested during Due Diligence typically falls into two categories: historical customer data and forecasts for future customers. When it comes to forecasts, buyers are usually interested in sales projections, the sales pipeline with associated probabilities, and ongoing customer projects. Accessing this information shouldn’t be an issue as it’s usually available in CRM – but it’s wise to double-check this well in advance. 

Your focus should be on ensuring that historical customer data is comprehensively documented  ideally since inception, but at a minimum, the last three years. A customer list, your largest clients, and their share of total revenue are easy to provide. However, when buyers request segmented customer data – e.g. by size, industry, country, or customer type – the task becomes more challenging if you haven’t prepared.

Buyers may also want to see profitability by each customer segment. For project-based businesses, this is relatively straightforward by allocating costs to customer projects. In subscription-based businesses, such as SaaS, calculating profitability requires using estimates.

When done right, most of this data can be pulled from accounting, provided that customers have been set up as a dimension in your bookkeeping. Ensure that this is in place ahead of time. For subscription businesses, pay special attention to churn – customers who have canceled. Churn tells a lot about the quality and appeal of your offering and is therefore of high interest to buyers. Always investigate why a customer canceled and carefully document your findings. You will certainly need this data during DD.