Due Diligence: What It Gets Wrong, What It Gets Right, and What It Misses Completely

Q: In your experience, what’s the biggest misconception about due diligence?

Honestly? That it’s a checklist. That it’s a phase in the deal cycle you just “get through.” Most teams treat due diligence like it’s something you assign to the analysts, run some reports, confirm some boxes, and move forward. But that mindset is dangerous.

Because real diligence isn’t about confirming what the seller claims—it’s about uncovering what no one thought to ask. And that takes more than documents and spreadsheets. It takes patterns, context, contradiction. 

Q: What makes for an effective diligence process, then?

You need two things: domain fluency and operational empathy. A good team doesn’t just review metrics—they understand what those metrics mean inside the business. For example, I once reviewed a company where customer acquisition cost looked fantastic. But a deeper look revealed that 72% of those customers never made a second purchase. High CAC is a red flag. But low CAC with high churn? That’s a slow bleed no one sees coming.

That’s why the right due diligence process doesn’t just look at where the business is—it models where stress might appear if variables shift. What happens if payment terms get tighter? If supply chains wobble? I’m looking for resilience under pressure.

Q: How does the emotional or human factor play into this?

More than most people admit. Founders often tell the story of their business like it’s a highlight reel. They’re not lying—they’re just selectively narrating. And that’s natural. But our job isn’t to be impressed. Our job is to be curious.

I always ask myself: What’s not being said here? Where are the blind spots? In one case, a team presented immaculate financials, but hadn’t updated product documentation in two years. When we asked why, they said the senior developer “had it all in his head.” That’s not a technology issue—that’s a risk issue. And it’s the kind of thing only due diligence done with operational awareness will catch.

Also, I always ask to speak with someone two layers below leadership. That’s where you get the real texture. 

Q: How do you handle tension when red flags come up during diligence?

Directly, but constructively. If I flag something material, I don’t deliver it like a gotcha moment. I frame it in terms of options. For example: “Here’s what we found, here’s how it could impact integration, and here are two ways to mitigate it.” That reframing turns resistance into engagement. People aren’t defensive if they feel part of the solution. At its best, proper diligence builds alignment—not just accuracy.

Q: What role does communication play in making diligence successful?

Huge. Transparency, pace, and tone all matter. If founders feel ambushed, they shut down. If teams feel micromanaged, they stop volunteering useful insight. I’ve found that keeping communication tight, respectful, and rhythm-based—short syncs with follow-ups—does more for the process than one marathon meeting ever could.

Q: What do people underestimate most during diligence?

Integration. Everyone is focused on the close, but the bigger story is what happens after. The best due diligence doesn’t just identify risks—it proposes how to mitigate them. It sets the foundation for the first 100 days post-deal. If you’re not coming out of diligence with at least two implementation-ready insights, you’re not doing it right.

Q: Final thoughts?

If diligence feels too clean, it’s probably incomplete. If it feels like it slowed you down, it probably saved you. And if you think it’s just about compliance, you’re missing the strategic leverage it offers. Done well, it doesn’t just confirm. It transforms how you see what you’re about to own. It protects value, people, and the future you’re about to build.