Technical Risk Assessment
Forensic operational diligence to identify risks beyond financial statements. Understanding the technical and operational foundation of your acquisition target.
The "Black Box" Between EBITDA and Reality
Financial Due Diligence verifies the past (EBITDA).
Legal Diligence verifies the liability.
Technical Diligence verifies the engine.
Most operational risk in SMB acquisitions lies in the connection (or disconnection) between the financial statements and the daily operations. I apply forensic data analysis to raw logs, code, and operational metadata to answer one question: Is the data in the pro forma real, or is it held together by duct tape?
1. Core Operational Integrity
Validating the baseline assumptions in your pro forma. Applies to all deal types.
The "Active Customer" Reality
The Risk: Finance defines "active" as "under contract." You care about whether customers will pay you cash once you buy the company.
The Audit: We reconcile active customer counts across the CRM, QuickBooks, bank receipts, and product usage logs. Discrepancies often exceed 20%. Did payment processing fail while the customer remains marked as active? Did the business ship products without collecting payment? This variance destroys pro forma reliability.
Data Sovereignty & CRM Hygiene
The Risk: The client list may be stored on the owner's personal device rather than in company-controlled systems.
The Audit: We trace the digital breadcrumbs (email and text logs) for the last five invoices. If the origination isn't on company property, you aren't buying a customer base; you're leasing the owner's rolodex.
True Burden Rate Analysis
The Risk: Margin is rarely just bill rate minus pay rate.
The Audit: We recalculate gross margin applying the actual burden: payroll tax, insurance, hardware amortization, and seat licenses. If these hidden costs shift your LTV/CAC ratio, the deal model breaks.
2. Industry-Specific Modules
Select the module relevant to your target asset.
SaaS & B2B Module
For software, marketplaces, and staffing firms.
Cloud Infrastructure Audit
The Risk: "Zombie" resources consuming cash flow without providing value.
The Audit: We analyze cloud cost data using tools such as AWS Cost Explorer to identify instances with less than 5% CPU utilization. Often, development environments created for testing two years ago continue billing. This represents immediate EBITDA add-back potential.
Roadmap vs. Revenue ROI
The Risk: Building features that nobody uses.
The Audit: We correlate engineering tickets against page views and usage statistics. If you're maintaining a "feature ghost town" that drives zero revenue but consumes 30% of R&D, you're destroying value.
Discount Cohort Decay
The Risk: Acquisition promos (freemium, year-one discounts) may mask underlying churn issues.
The Audit: We model retention rates by cohort. Discounted users often churn three times faster than full-price users. If growth relies on promos, terminal value is overstated.
The "Bus Factor" Code Scan
The Risk: Intellectual property fragility due to single-point-of-failure knowledge.
The Audit: We perform git log analysis to determine code authorship patterns. Was the code written by a team, or one founder? If that founder leaves, is the codebase maintainable?
Asset Rot (Databases)
The Risk: A "list of 100,000 candidates" is worthless if 90% have bounced.
The Audit: We analyze last activity dates and bounce flags. If records haven't been contacted in five years, write the asset value to zero.
Implementation Margin Bleed
The Risk: Giving away free onboarding to close deals.
The Audit: We cross-reference implementation logs against invoices. If the team spends 40 hours onboarding a client for free, customer acquisition cost (CAC) is significantly higher than reported.
Logistics & 3PL Module
For warehousing, distribution, and asset-heavy ops.
Estimating Variance
The Risk: Product changes outpacing pricing logic updates.
The Audit: We compare estimated cost versus actual landed cost over the last 24 months. If the variance is widening, the pricing software is obsolete.
Inventory Integrity ("Bin Empty")
The Risk: Phantom inventory that exists in the system but not in physical reality.
The Audit: We flag high-frequency "bin empty" exception reports. If the system says inventory is there but the picker can't find it, balance sheet inventory is wrong.
Warehouse Optimization
The Risk: Inefficient pick paths increasing labor costs.
The Audit: We verify the warehouse map logic and determine when the optimization algorithm was last run. Stale optimization leads to wasted labor hours and reduced throughput.
Restock Latency
The Risk: Inventory stuck in returns is invisible to the sales team.
The Audit: We measure the time delta between return received and return to stock. The business may be spending cash to buy new stock while sellable stock rots on the dock.
Services Module
For HVAC, plumbing, and field services.
The Overtime/Burnout Cliff
The Risk: $60,000 wages for 40 hours is sustainable; $60,000 for 60 hours is a turnover bomb.
The Audit: We analyze raw payroll exports for hours worked. If the business relies on excessive overtime, you will need to hire more headcount post-close (additional $40,000 cost) just to maintain current output.
Productivity Reality (GPS Audit)
The Risk: Optimistic mental math on technician capacity.
The Audit: We compare dispatch logs versus fleet GPS and geofence data. Did the job take two hours or four? You need the actuals for accurate estimates.
Truck Stock Black Hole
The Risk: Inventory disappearing into vans without being billed.
The Audit: We compare parts purchased versus parts billed per van. If Van #4 buys 100 copper fittings but bills for 20, the driver may be doing side jobs with your inventory.
Dispatch Dependency
The Risk: Dispatch is a person, not a system.
The Audit: We assess whether routing logic is documented or purely intuitive. If the dispatcher quits, does the fleet stop moving?
Pricing & Margin Arbitrage
The Risk: Sales reps buying revenue with excessive discounts.
The Audit: We analyze price variance by salesperson. Are they devaluing the brand? When the seller leaves and you enforce standard pricing, will the discounted "friends" churn?
Hidden Refunds (Deferred Revenue)
The Risk: Avoiding cash refunds by promising free service next time.
The Audit: We perform keyword searches in CRM and email systems ("sorry", "make it right", "next time"). These promises represent off-balance-sheet liability you will have to honor.
AI & Automation Module
Valuations for "AI companies" are inflated. We determine if there is actual IP or just a dependency on OpenAI.
The "Wrapper" vs. "Core" Test
The Risk: Paying a 10x revenue multiple for a company that is just a UI on top of ChatGPT.
The Audit: We inspect the codebase. Is the "AI" just an API call to OpenAI or Anthropic with a system prompt? If so, they have zero moat. A competitor can clone their core value in a weekend.
The "If-Statement" Illusion
The Risk: Rules-based logic marketed as "machine learning."
The Audit: We review the logic flow. Are there actual weights and training data, or is it just a giant decision tree of if/then statements? If it's the latter, it's brittle and unscalable, not "adaptive AI."
The "Talent Trap" (True AI Risk)
The Risk: They actually built a custom model (true AI).
The Audit: We assess who maintains the model. If it requires a PhD to retrain and that person leaves post-close, the product is dead. We evaluate the complexity of the MLOps pipeline—is it automated, or does it require "Dave" to manually tune hyperparameters?
Systems Operations Module
Quantifying the "Metawork": the cost of moving data between tools instead of doing the job.
The "Human API" Tax
The Risk: Highly paid employees acting as copy-paste bridges between incompatible systems.
The Audit: We track the workflow of a single unit of work (e.g., an order). Does it flow automatically from CRM to ERP to fulfillment? Or does a human have to re-enter the data three times? This is a hidden labor cost.
The "Alt-Tab" Economy (Context Switching)
The Risk: Fragmented toolsets destroying focus and efficiency.
The Audit: We interview the team or audit browser history logs. Do they spend hours a day toggling between Slack, email, Asana, and Salesforce just to find one file? High context switching correlates directly with high error rates and low morale.
Tool Sprawl & Shadow IT
The Risk: Paying for redundant SaaS subscriptions.
The Audit: We scan the credit card registry. Is the business paying for Trello, Monday.com, and Jira simultaneously? Are teams using unauthorized tools to bypass the "official" broken process?
Data Silos
The Risk: Management reporting is impossible because data doesn't sync across systems.
The Audit: We verify whether marketing data (HubSpot) matches sales data (Salesforce). If the systems don't sync, customer acquisition cost (CAC) calculation is a guess, not a metric.
Your Path to Confident Acquisition
Three clear steps to validate, verify, and optimize your acquisition target. Start small, scale as you gain confidence.
Save $30K+ in wasted diligence
✓ Fee applies toward Phase 2
Quick Validation
Know within days if this deal is worth pursuing—before you invest in expensive financial and legal diligence.
What You Receive
- • Due Diligence Checklist: A prioritized list of 10–15 critical questions tailored to this specific business
- • Risk Assessment: Early warning signals and data gaps that could derail your deal
- • Go/No-Go Recommendation: Clear guidance on whether to proceed or walk away
Our Process
We review the CIM, management presentation, and data room index to identify red flags and missing evidence. We'll tell you exactly what to ask for and what answers should concern you.
💡 Best for: Buyers in early deal stages who want to avoid costly mistakes
Only $12,500 if you completed Phase 1
Flexible payment: Cash or equity roll option
Deep Verification
Get a complete picture of operational reality versus the financial story. Know exactly what you're buying and what it will cost to fix.
What You Receive
- • Comprehensive Audit Report: Side-by-side comparison of pro forma assumptions versus operational reality
- • Investment Roadmap: Year 1 CapEx budget and 100-day integration plan with clear priorities
- • Risk Prioritization: What must be fixed immediately vs. what can wait
- • Negotiation Leverage: Data-driven points to adjust purchase price or terms
Our Process
We conduct a full 21-point forensic audit across three critical areas:
- Revenue reality and customer validation
- Asset integrity and data quality
- Systems operations and technical debt
Includes direct access to raw data, code, logs, and operational systems.
💡 Best for: Buyers ready to commit but need confidence in the numbers
Fee credited toward equity
+ Co-investment opportunity available
Operational Excellence
Hit the ground running post-acquisition with clean systems, integrated data, and real-time visibility into your new business.
What You Receive
- • Executive Dashboard: Real-time visibility into operations, revenue, and key metrics
- • Integrated Systems: Data flows automatically between CRM, accounting, and operations
- • Clean Data Foundation: Migrated, validated, and ready for growth
- • Documentation & Training: Your team knows how to use and maintain everything
Our Process
We execute the 100-day integration plan from Phase 2: migrating data, connecting systems, building dashboards, and training your team. You get a business that's ready to scale, not one that needs constant firefighting.
💡 Best for: Buyers who want a smooth transition and immediate operational control
Ready to Validate Your Next Acquisition?
Start with Quick Validation to avoid costly mistakes, or jump straight to Deep Verification if you're ready to commit. Every engagement includes a clear go/no-go recommendation.