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SAAS Due Diligence Checklist in 2025 | Definitive Guide
Vlad Zghurskyi
03.10.2025
10 Min Read
Master SaaS due diligence in 2025 with our definitive checklist. Prepare your SaaS company for acquisition, understand the due diligence process, and maximize recurring revenue.
SAAS Due Diligence Explained
Selling or investing in a SaaS business in 2025? Then you already know one thing: the due diligence report will make or break the deal. Whether you’re preparing for the sale of your SaaS business, attracting investors, or navigating SaaS M&A, a comprehensive SaaS due diligence process is one of the most important things.
Buyers want proof that recurring revenue is stable, churn is under control, and your product won’t collapse under technical debt. Sellers, on the other hand, need to prepare for due diligence months in advance to showcase value and avoid last-minute red flags.
But… what is due diligence in SaaS, really? Metaphorically, it’s like a systematic X-ray of your company done before any acquisition or major investment. For SaaS startups and scale-ups alike, mastering this process ensures smoother negotiations and stronger valuations.
This guide breaks down the SaaS due diligence checklist step by step so that you can prepare with confidence for anything: no matter if you’re buying, selling, or simply getting your SaaS startup investor-ready. Read on!
What is Due Diligence in SaaS?
Due diligence in SaaS refers to the systematic process of evaluating a SaaS company before an acquisition or investment. Just like in traditional M&A, SaaS due diligence ensures the buyer or investor understands the risks, strengths, and weaknesses of the business
- Financial due diligence – verifying financial statements, revenue recognition, cash flow, churn rate, and customer lifetime value (CLV).
- Operational due diligence – reviewing organizational structure, employee census, and product roadmap.
- Technical due diligence – assessing software architecture, infrastructure, and technical debt.
- Legal due diligence – confirming intellectual property rights, customer and vendor contracts, and compliance.
In short, due diligence ensures acquirers know exactly what they’re buying, while sellers demonstrate the full value of their recurring revenue model.
SAAS Due Diligence Checklist
When preparing to sell your SaaS business, this due diligence checklist will guide you through the process. These steps may vary depending on the deal size, but they represent the most common items on the checklist.
Step 1: Financial Statements and Metrics
Buyers will request audited financials, monthly recurring revenue (MRR), churn rate, customer acquisition cost (CAC), and revenue recognition practices. Clean financial statements are the foundation of trust.
Step 2: Customer and Revenue Data
A detailed overview of the customer base, churn history, and new customer growth is key. Acquirers want to confirm recurring revenue stability and customer acquisition patterns.
Step 3: Sales and Marketing
Show how your SaaS business generates leads, manages CAC, and drives customer acquisition. Highlight sales funnels, marketing efficiency, and retention strategies.
Step 4: Product and Technology Review
The product roadmap, software architecture, and handling of technical debt will be analyzed. Due diligence ensures the platform is scalable and not overly dependent on outdated code.
Step 5: Legal and Compliance Review
From intellectual property to data protection agreements, legal diligence includes contracts, licenses, and regulatory compliance.
Step 6: Organizational and HR Review
Acquirers review employee census, org chart, and compensation structures. Retention of key staff post-acquisition is often critical.
Step 7: Vendor and Partner Contracts
All third-party contracts that affect operations or revenue must be disclosed. This step ensures no hidden risks tied to vendor lock-in.
Step 8: SaaS Metrics Deep Dive
Beyond MRR, acquirers will also want to consider customer lifetime value (CLV), gross margin, churn rates, and cohort analysis. Strong financial metrics help secure a better SaaS valuation.
Step 9: Operational Efficiency
Detailed due diligence includes analyzing cost structure, support systems, and processes for scaling.
Seller vs Buyer SAAS Due Diligence
- Buyer’s view: minimize risk, validate growth, and ensure recurring revenue is sustainable.
- Seller’s view: prepare for preliminary due diligence, present financials clearly, and remove red flags.
Common Red Flags & Mistakes in SAAS Due Diligence
During a SaaS acquisition, buyers acquire a recurring revenue engine, customer trust, and intellectual property. That means red flags can come from very different corners of the business. Here are some of the most critical things to watch out for:
1. Inconsistent Financial Records
If MRR, churn, or CAC numbers don’t line up across financial statements, dashboards, and bank records, that’s a major warning. Buyers see this as either poor reporting or potential revenue manipulation.
2. Dependency on a Few Customers
When 40% of revenue comes from two enterprise contracts, a single cancellation can sink growth. Over-reliance on a handful of customers makes recurring revenue fragile.
3. High Employee Turnover in Key Roles
If engineers, sales leaders, or customer success managers are leaving frequently, it signals cultural or management issues. In SaaS, stability in technical and customer-facing teams is critical for long-term growth.
4. Intellectual Property Disputes
A SaaS company’s intellectual property is its crown jewel. Unclear IP ownership, lack of patents, or reliance on third-party code without licenses can derail an acquisition.
5. Weak IT and Security Systems
For SaaS companies, inadequate IT infrastructure or outdated security measures don’t just mean inefficiency — they can open the door to data breaches and regulatory fines.
6. Complex or Opaque Corporate Structure
If the SaaS business is split into multiple entities with unclear ownership of contracts or technology, it creates friction in the due diligence process. Buyers prefer straightforward structures.
7. Technology Obsolescence
If the product is running on legacy code that requires massive reengineering, acquirers will discount heavily. Technical debt that slows innovation is a silent deal-killer.
8. Poor Cash Flow Management
A SaaS business can be profitable on paper yet bleed cash because of misaligned billing, delayed collections, or aggressive spending. Buyers will dig deep into cash flow, not just top-line MRR
9. Significant Pending Legal or Tax Issues
Unresolved lawsuits, unclear GDPR compliance, or unpaid tax liabilities create unpredictable risks. Acquirers don’t want surprises after closing.
10. Cultural Misalignment
Even if metrics look good, a stark cultural mismatch between seller and buyer can sink post-acquisition integration. If teams don’t align on working style, values, or vision, productivity and morale suffer
11. Overstated or Misleading Metrics
Inflating customer acquisition cost (CAC) efficiency, downplaying churn, or presenting non-standard revenue recognition practices is a trust-killer. Experienced buyers spot these quickly.
12. Lack of Disaster Recovery & Continuity Plans
A SaaS platform without robust disaster recovery puts recurring revenue at risk. Buyers will want evidence of tested backup systems and continuity planning
Why this matters:
Unlike traditional businesses, SaaS companies sell trust and stability as much as software. If any of these red flags show up during the due diligence process, they can cut valuation, delay the deal, or stop an acquisition entirely.
Key Takeaways
- Due diligence is a crucial step in every SaaS acquisition process.
- A solid SaaS due diligence checklist covers financials, customer and revenue data, legal compliance, technology, and HR.
- Sellers should prepare for preliminary due diligence well in advance by cleaning up financial statements, contracts, and SaaS metrics.
- Buyers rely on detailed due diligence to ensure the recurring revenue model is stable and scalable.
- Whether you plan to sell your SaaS business or invest in one, thorough diligence ensures both sides avoid surprises.
FAQ
What are the main steps during SAAS Due Diligence?
The SaaS due diligence process starts when investors or buyers request preliminary SaaS due diligence. Typically, the process covers both historical financial performance and forward-looking projections, along with compliance, customer contracts, data security, and tech infrastructure. Since due diligence requires structure, most firms rely on a formal SaaS due diligence checklist to make sure nothing slips through the cracks. Think of it as checking all the components of a SaaS business before committing to a deal.
What are the main steps during SAAS Due Diligence?
The SaaS due diligence process starts when investors or buyers request preliminary SaaS due diligence. Typically, the process covers both historical financial performance and forward-looking projections, along with compliance, customer contracts, data security, and tech infrastructure. Since due diligence requires structure, most firms rely on a formal SaaS due diligence checklist to make sure nothing slips through the cracks. Think of it as checking all the components of a SaaS business before committing to a deal.
What are the main steps during SAAS Due Diligence?
The SaaS due diligence process starts when investors or buyers request preliminary SaaS due diligence. Typically, the process covers both historical financial performance and forward-looking projections, along with compliance, customer contracts, data security, and tech infrastructure. Since due diligence requires structure, most firms rely on a formal SaaS due diligence checklist to make sure nothing slips through the cracks. Think of it as checking all the components of a SaaS business before committing to a deal.
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