Due diligence is undoubtedly one of the most critical processes when buying or selling a business—especially in the blue-collar sector. Whether you’re acquiring a plumbing company, an electrical service provider, or a small fabrication workshop, conducting a thorough appraisal helps ensure the business you’re stepping into is as stable and legitimate as it appears. This process allows both buyers and sellers to examine key areas such as financials, operations, staff qualifications, and asset conditions.
If you’re currently evaluating a trade or service-based business in Australia, here’s what you should check during the due diligence phase to protect your investment and make informed decisions.
What Is Due Diligence?
Due diligence is part of the process that individuals or businesses go through as they purchase another business. It’s a comprehensive appraisal of the business being sold and the prospective buyer. When due diligence is conducted, the business is assessed and inspected closely, including its financial status, employees, equipment, assets, customers, and anything else that influences its operations. Normally, the time it takes to complete due diligence differs depending on the size and complexity of the business.
This is especially important when acquiring trade-based businesses—such as plumbing companies, HVAC providers, or electrical contractors—where tools, licenses, certifications, and customer service history directly impact the business’s viability and growth.
Why Is It Important?
Why is due diligence done? If you were spending significant money on an investment you want a return from, would you like to check it thoroughly before investing? This is the same concept that due diligence adopts. When you do due diligence, you’re checking the business’s financial health, operations, and potential for growth to ensure you’re making a wise investment.
When you buy a business, depending on the conditions of the sale, you’re buying everything, including its liabilities and challenges. Due diligence helps you make a more informed decision about your purchase. During the due diligence, you might see that the company’s culture or operations don’t suit your business style, or that there are outstanding taxes. These are red flags that you may not want to take on.
For Trade Businesses
For trade businesses, this means checking for issues like expired contractor licenses, employee safety training gaps, or equipment that’s near end-of-life. If you’re inheriting service contracts with councils, real estate managers, or builders, you’ll want to verify these are legally transferable and still active.
Due Diligence Checklist
We encourage you to be as thorough as possible because of the risky implications of not doing your due diligence well. These are some of the aspects of the business that you should take a closer look at:
1. Finances
From the get-go, finances will tell you a lot about how the business is managed and how healthy it is. Be meticulous when you check the financials, as it can be easy to miss important data when going through trading sheets, balance sheets, and the overall financial forecast for the business. Here are some of the most important factors we would suggest you check:
- Check all the company accounts and statements that deal with cash flow. This includes the information related to profits and losses
- Assess any liabilities, like debt
- Check how many staff are on payroll
- If the business is VAT registered, check that
- Check what its tax liability is
- Look at the depreciation and amortisation processes
2. Legal
It’s also important to assess the business’s legal structure and whether they are compliant to local labour laws. Go over the likes of supplier and customer contracts, tax returns, insurances, permits and licenses, healthy and safety compliance, and any potential legal battles that may be coming the businesses way.
3. Operations
Operations are generally the backbone of a business. Ideally, you should want a company that has its operations set so that you can simply slip into the process without dealing with a handful of issues. When it comes to operations, do a SWOT analysis on components like the supply chain, logistics, IT, or marketing. This should reveal whether there are any issues that you may need to try to resolve before buying the business.
4. Assets
Assets add to the business value quite substantially. Consider the value and need for the assets as you do due diligence. This includes things like:
- Any property or equipment that the business owns
- Fixed or variable assets
- Trademarks, patents, or any intellectual property rights the business has
5. Employees
Speaking of assets, you also need to assess the employee data, for instance, how many employees are there and what they are paid. In addition to that, company culture and how the employees work are also important. Go over the following regarding employees:
- Check their contracts
- Familiarise yourself with the company’s structure
- Look at their qualifications and their roles within the company
- Consider staff turnover and workplace satisfaction
- Look at staff benefits like medical aid or pension funds
- Have there been any disputes among staff
6. Marketing
Finally, consider how the business looks in the public eye. Examine the business’s marketing strategy, its marketing budget, and how effective its strategies are. Is the business pumping money into marketing but not converting sales, or are they meeting key performance indicators regularly and reaching their target audience?
Special Considerations for Trade and Blue-Collar Businesses
When buying a business in the trades or blue-collar sectors—like construction, electrical services, or fabrication—there are unique factors to assess during due diligence:
- Licensing & Certification Compliance
- Confirm whether the business holds up-to-date trade licenses (e.g., QBCC license for builders in Queensland).
- Are employees qualified with the right certifications (e.g., white cards, high-risk work permits)?
- Check for expiring or non-transferable licenses.
- Equipment and Fleet Condition
- Are vehicles well-maintained and registered?
- Is there a tool inventory? Are key machines leased or owned?
- Factor depreciation of aging equipment into your valuation.
- Job Management & Quoting Systems
- What scheduling system is used (e.g., ServiceM8, Tradify, SimPRO)?
- Is job tracking manual or digital?
- Are quoting processes standardized or ad-hoc?
- Customer Contracts and Local Reputation
- Are there ongoing contracts with real estate firms, councils, or facility managers?
- Check online reviews on Google, Yelp, or trade service platforms.
- Look for customer complaint trends and warranty obligations.
- Workforce Readiness
- How many skilled tradespeople are retained?
- Are there active apprenticeships or subcontractor arrangements?
- Is there a handover plan to retain staff post-sale?
Due Diligence Focus by Business Type
| Trade Business Type | Key Due Diligence Focus Areas |
| Plumbing | Tool condition, licensing, water board compliance, warranty liabilities |
| Electrical | Contractor licenses, safety protocols, high-risk work permits |
| HVAC | Refrigerant handling licenses, equipment age, maintenance contracts |
| Construction/Building | QBCC compliance, open jobs, insurance, contract disputes |
| Landscaping & Maintenance | Equipment fleet, staff qualifications, council contracts |
| Auto Repair Shop | Diagnostic tools, workshop equipment, warranty claims, EPA compliance |
Hire a Professional to Do Due Diligence
When you reach the point where due diligence is necessary, you need someone who’s trained to spot issues with a business—especially in the blue-collar and trade sectors where tools, certifications, staff licenses, and service contracts all play a crucial role. This is particularly important for businesses related to trade jobs in Australia, where maintaining compliance and managing skilled labor can directly impact a company’s value and operations. Partnering with recruitment experts like Dayjob Recruitment can also help ensure your workforce remains solid and qualified during the transition.
This is why we recommend hiring a business broker. Not only do they have a keen eye for all things business, but they will also free you up to focus on preparing your business for the transition.
If you’re looking for a trustworthy broker, here’s a helpful page from Benchmark Business Brokers in Brisbane. Benchmark Business Brokers has an impeccable reputation for selling businesses in Australia, particularly those in skilled trades, and can help you process your entire sale while guiding you through every step of the due diligence process.
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Final Thoughts
Due diligence gives you a clear view of a business before making a commitment—especially vital when purchasing a trade or blue-collar operation. It uncovers potential risks related to staff readiness, equipment condition, licenses, and client relationships. Use the checklist above to ensure your investment aligns with your expectations and long-term goals.
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FAQs
What is due diligence in the context of buying a business?
Due diligence is the comprehensive process of investigating and verifying key aspects of a business before purchase. It includes reviewing financial records, legal compliance, assets, staff qualifications, licenses, operations, and market position to ensure the business is legitimate, viable, and a sound investment.
Why is due diligence especially important for trade and blue-collar businesses?
Trade and blue-collar businesses often depend heavily on tools, licenses, service contracts, and qualified staff. Missing or outdated certifications, faulty equipment, or legal issues can significantly reduce the business’s value and operational capability. Due diligence ensures you’re not stepping into hidden liabilities.
What documents should I review during due diligence?
You should thoroughly review:
- Profit & loss statements
- Tax returns and VAT records
- Payroll details
- Staff contracts and licenses
- Customer and supplier agreements
- Insurance and compliance documents
- Asset registers and depreciation schedules
What are common red flags to watch out for?
- Expired or non-transferable licenses
- Outstanding tax liabilities
- High staff turnover or workplace disputes
- Poor equipment condition
- Unfavourable or non-renewable service contracts
- Poor online reviews or reputational issues
Should I inspect the physical assets of the business?
Yes. Evaluate the condition and ownership status of tools, machinery, vehicles, and any fixed assets. Factor in depreciation and verify whether key equipment is leased or owned. This directly impacts business value and operational readiness.
