Blog · Published 2026-10-18
A search fund due diligence budget: what drives the cost, and how to stage it.
Diligence cost depends on the deal's size and complexity, how it is financed, which workstreams you hire out, and how many deals you take deep before one closes. We give no dollar figure because none holds across deals; get written scopes and quotes for your own. The way to control the budget is to stage it, so the cheap checks kill weak deals first.
What moves the cost
| Driver | Why it changes the cost | What to do |
|---|---|---|
| Deal size and complexity | More entities, locations, contracts and systems mean more to read and more to test. | Ask each provider for a scope that names what is in and out. |
| Financing | A lender can require work you did not plan for. For certain SBA 7(a) deals from 1 October 2026, an independent quality of earnings report is required, prepared by a professional engaged on behalf of the lender (AAFCPAs summary). | Ask the lender, before the LOI, who engages the provider, who pays and what it needs. |
| Workstreams hired out | Financial, tax, legal and operational reviews are separate engagements with separate scopes. | Decide which are essential for this business and which can be done by you or skipped. |
| Quality of the data room | Gaps and contradictions found late cost provider hours; found early they cost a question to the seller. | Check completeness first; see the data room checklist. |
| Deals taken deep before one closes | Every deal that dies after paid work adds to the total. | Stage the spend, as below. |
| Fee structure | Fixed, hourly and capped fees put the overrun risk on different people. | Get it in writing before work starts. |
A staged approach
- Stage 1, your own time and software. Read the CIM against the financials and tax return, list the contradictions and gaps. A deal that fails here has cost you almost nothing. The CIM review template is a way to do it.
- Stage 2, questions to the seller. Send the gap list. How the seller answers is itself information.
- Stage 3, paid specialists on a signed LOI. Engage the financial, legal and other providers whose scope you have agreed in writing.
Figures we deliberately do not give
Articles on this subject often quote a typical cost for a quality of earnings report or a legal review. We have not found a source for such figures that we can verify and that applies to your deal, so we do not print one. Ask two or three providers for a quote on your actual deal. Deal OS software prices are on the pricing page.
Worked example from the sample brief
What Stage 1 produces, from the sample brief (a synthetic deal): items from its "What to confirm before LOI" section, quoted exactly.
- Item 1. Revenue cut: fixed inspection vs variable repair/call-out billings.
- Item 2. Northgate contract: term, assignability on change of control, tenure, owner.
- Item 3. State licensing requirement + a qualified in-house successor.
- Item 4. Documentary support for each add-back, especially the $65K legal settlement.
The example is Sentinel Fire & Safety, Inc., a synthetic company built to show the product. Nothing in it describes a real business, and the same output shape applies to a real data room. See the whole thing at /sample-brief.
See it on a deal.
Open a real brief on a synthetic deal without an account, or check how a single deal is priced.
