Diligence on a $200,000 software business should take days, not months, and it should be arithmetic rather than opinion. The point is not to find something wrong. The point is to convert what you find into a number, so the conversation is about price instead of about vibes.
Run these first, in this order
- 01Revenue by customer, twelve months. Compute the top customer as a share of the total, then ask when that contract renews.
- 02Monthly revenue churn, twelve months, as a series. A rising line is a different business from the same average with a falling one.
- 03Payment processor export, not a spreadsheet. Stripe or Paddle straight from the source, matched against the bank.
- 04Cost floor. Hosting, tooling, payment fees and support, with the founder's own time removed and repriced at what it would cost you.
- 05Ownership. Domain, repository, DNS, app-store accounts, payment processor. Every one of them, in writing, before money moves.
- 06Founder dependency. What breaks in week one if the founder answers nothing? Support load and deploy access are where the surprise lives.
- 07Concentration of acquisition, not just of revenue. One channel supplying every signup is the same risk in a different coat.
What each finding is worth
Our engine runs the pricing side of this from six inputs and reports what each finding costs. On the example target — $8,000 MRR, 4.1% churn, 31% concentration — the checks that flagged, with the dollars attached:
| Check | Verdict | Dollars |
|---|---|---|
| Growth rate | material | $23,000 |
| Customer concentration | material | $21,500 |
| Monthly revenue churn | minor | $29,000 |
Same engine, same figures a seller sees in their own Value Audit. We do not run one set of numbers for buyers and another for sellers.
Those add up. This target's baseline would be $187,000 with the two main drags at neutral; as it stands it prices at $131,500. That $55,500 is what diligence is for.
What you can safely skip at this size
| Item | Worth doing under $500k |
|---|---|
| Quality-of-earnings report | no |
| Full code audit by a third party | no |
| Penetration test | no |
| Customer reference calls | yes |
| Processor and bank reconciliation | yes |
| Written asset transfer list | yes |
The skippable items cost more than they can save you on a deal this size. The three worth doing cost a weekend.
The one thing buyers get wrong
Treating a finding as a reason to walk instead of a reason to reprice. At this size most businesses have two or three genuine flaws, because they were built by one person with a job to do. The buyers who do well are the ones who can put a number on the flaw and say it out loud.