What is commercial due diligence?

What commercial due diligence checks

It tests one thing, whether the revenue the plan promises is likely to arrive. So the work goes outside the company, because its own reports only show what has already happened.

A typical review covers these areas.

• The market’s size and growth are checked against independent sources rather than the figures in the pitch deck.
• Customers, both those who stayed and those who left, are asked why they bought and what would make them go.
• The competition is mapped, with attention to whom the company loses deals to and why.
• The pipeline is examined for how a qualified lead is defined, how many leads reach a close and how long deals take.
• The forecast is rebuilt from those findings and set beside the one in the plan.

How it differs from financial and legal diligence

Financial diligence confirms that revenue and costs are recorded correctly. Legal diligence checks contracts, ownership and liabilities. Both look at the company as it stands on paper. Commercial diligence asks whether the business will keep earning in the market it sits in.

The difference shows when a B2B software company reports a large pipeline and its accounts are clean. The pipeline counts every inquiry as a qualified lead, including people with no budget and no authority to buy. Financial diligence passes it, because the figures are recorded accurately. Only a count of how many of those inquiries became a real buying conversation shows how little the forecast rests on.

None of this makes the company a bad bet. It means the price and the plan should rest on the real number. A review that confirms the story is useful as well. It gives an investor confidence, and it gives a founder evidence that holds when an investor pushes back.

What to check before you commission one

Start with the claims your forecast depends on. Write down the few that carry the most weight, such as how fast the market is growing, why customers pick you over the alternative, or how many leads turn into deals. Then ask what evidence from outside your own data supports each one. A claim with no outside support is where a reviewer will push first.

Founders gain by doing this before a raise, because an investor will do it anyway and it is better to find the gap yourself. Investors gain by tying the scope to the deal thesis, so the work answers the questions that decide price and terms instead of producing a general market report. That outside test is what our commercial due diligence service is for, before a deal or before a raise.