DUE DILIGENCE
An ecommerce due diligence checklist for buyers
Due diligence is the work of checking whether the business you think you are buying matches the evidence. For an ecommerce acquisition, that means connecting the accounts to orders, products, customers and the practical realities of taking over.
Agree what is being assessed
Start with a written description of the proposed transaction. Which brand, domains, stock, intellectual property, contracts and company interests are in scope? Which obligations would remain with the seller? Ask who owns each important asset and who can authorise its transfer.
For a UK company, Companies House information can help you check its registered identity, filings and officers. Treat it as one source of evidence alongside the underlying records and professional checks. A listing description or company search alone cannot establish everything a buyer needs to know.
Reconcile the financial story
Request monthly accounts, store exports, payment-provider statements and supporting bank records through an agreed secure process. Compare consistent date ranges and explain the difference between gross orders, net sales and cash received. Refund timing, taxes and payment settlement can create differences that need a clear bridge.
Challenge proposed add-backs. Would the cost disappear for you, or would you need to replace it? Build your own view of operating profit after staffing, marketing, software and fulfilment. Check seasonality and whether recent trading still supports the historic picture.
- Sales and margin by month, product and channel.
- Returns, chargebacks, discounts and customer-service costs.
- Stock purchases, supplier deposits and working-capital needs.
- Founder duties, employment costs and evidence behind adjustments.
Check demand and customer acquisition
Separate first orders from repeat orders and look at customer groups over time. Ask whether repeat revenue comes from natural replenishment, subscriptions, promotions or a small group of heavy spenders. Check how cancellations, refunds and inactive subscribers affect the figures.
For paid marketing, compare platform-reported results with store sales and margin. Multiple channels can claim the same order. Ask what happened when budgets, creative or discounts changed. For organic traffic, review the pages and search queries that actually generate demand, and identify any dependence on one ranking or referral.
Walk an order through the business
Follow the journey from an order arriving to stock allocation, dispatch, delivery, returns and any customer complaint. Ask to see the process, rather than accepting that fulfilment is automated. Record who resolves exceptions and what happens during a busy period.
Inspect stock condition and ageing, supplier lead times, minimum order quantities and alternative suppliers. Clarify which supplier and fulfilment arrangements can continue under a new owner. A growth plan that needs a large stock order also needs a credible cash and delivery plan.
Verify access, ownership and transfer constraints
Create an asset register covering the store, domain, email, analytics, advertising, social profiles, creative files and software. Identify the legal owner, current administrator, billing arrangement and transfer process for each. Access to a dashboard does not automatically mean ownership of the underlying asset.
Plan customer-data handling with the appropriate adviser. The ICO’s acquisition guidance asks businesses to assess data sharing as part of due diligence, including its purpose, lawful basis, documentation and security. Its guidance is under review following legislation, so check the current position for the proposed transaction.
Source: ICO: data sharing due diligence in mergers and acquisitions
Test the handover before agreeing it
List the founder’s weekly responsibilities, the people who know how to perform them and the support a new owner would need. Ask what the founder does during supplier disputes, stock shortages or a sudden jump in returns. Those exceptions often reveal more than the normal process.
Build a handover plan with named owners, access requirements, training and acceptance checks. Keep legal, tax and accounting review alongside commercial assessment. The aim is a supported decision about the actual business, with unresolved matters reflected in the price, conditions or decision to stop.
| Finding | Evidence to obtain | Decision to make |
|---|---|---|
| One supplier provides most stock | Terms, capacity and alternative sourcing | Can supply continue after completion? |
| Founder handles all paid marketing | Workload, account access and replacement cost | Who operates it from day one? |
| Strong reported profit, little cash | Stock cycle, payment timing and cash forecast | How much additional funding is needed? |
Common questions
What should I check first when buying an ecommerce business?
Confirm what is for sale, reconcile financial performance and understand how the business runs without the founder. Use those findings to decide whether more detailed diligence is justified.
Does a due diligence checklist replace professional advice?
No. It organises commercial questions and evidence. The transaction also needs legal, financial and tax checks appropriate to its structure and circumstances.