We should've paused hiring. We trusted the team to continue with their process, but it was not robust, and we ended up with some regrettable new hires right when we got into the business.

Closing the loop on this thread as promised! Thank you to everyone who contributed. The comments produced 5 clear lessons for how you can approach diligence and the first 100 days. 1. You need to watch the work happen. The software list, SOP library, and org chart give you a starting point. However, you learn how the business operates by having someone (besides the seller) run a revenue-critical workflow from start to finish. Trace one transaction from its source document through cash collection, and ask employees to show you the files and tools they use. These tests surface shadow systems, undocumented steps, and key-person dependencies. 2. You need to underwrite transferability. Several commenters found that important advantages were tied personally to the seller (i.e., preferred supplier pricing, informal credit terms, priority scheduling, customer loyalty, and operating knowledge). You should confirm terms directly with major customers, vendors, and subcontractors, and review the underlying invoices. Historical earnings establish performance, however, transferability determines the economics you inherit. 3. You need to understand the team behind the org chart. People issues surfaced early (i.e., raise requests, unexpected bonus expectations, attendance problems, weak hiring, informal promises, and critical knowledge concentrated in one employee). Before closing, you should review compensation history, recent raises, commitments, role criticality, backup coverage, and retention risk by employee. Ask the seller who they would fight to keep, and use employee conversations to locate where authority and knowledge actually sit. 4. You need to cover a full operating cycle. Several surprises followed a calendar (i.e., collections shifted after the ownership change, payroll and benefit costs reset, certificates expired, and infrequent systems became necessary at quarter-end or renewal). You should review two years of monthly receivables aging and build a dated calendar covering licenses, regulatory events, renewals, recurring processes, and tasks performed less than monthly. If possible, seller support should span at least one full cycle of this work. 5. You need to allocate residual risk in the deal. Your purchase agreement and transition plan can make the remaining uncertainty manageable. Use specific representations, disclosures, holdbacks, seller notes, or earnouts for the exposures that matter. Tie economic protections to transferable gross margin where appropriate, define the seller’s post-closing availability, and fund the systems and control work required during the first 100 days. The question I am adding to my own diligence list is: “Show me how this happened the last time, who touched it, what happens when it fails, and what changes when you leave?” That question produces evidence about the workflow, the people, the failure points, and the company’s dependence on the seller. Thanks again to everyone who shared an experience. This was a helpful look at what sits between the standard diligence checklist and the operating reality of a newly acquired business.