- Financial diligence models headcount cost. It rarely tests whether the right people are in place.
- Key people, pay against market, and contractor classification are the most common gaps.
- A workforce plan tied to the value creation plan prevents surprises after close.
Financial diligence looks hard at the numbers. The people who have to deliver those numbers usually arrive as a headcount summary and an organization chart. Here are six things that often slip through.
1. Key-person dependency
Some businesses rely on one or two people for client relationships, technical knowledge, or operations. If they leave after close, the value goes with them. Find out who they are, what they know, and what it will take to keep them.
2. Pay against market
Pay well below market means turnover is coming. Pay well above market means cost the model did not expect. Both change the numbers.
3. Contractor classification
Many growing companies use contractors who work like employees. In both Canada and the US, misclassification can lead to back taxes, penalties, and benefit claims. It is cheaper to find before close.
4. Roles the thesis assumes
The value creation plan often depends on capabilities the company does not have yet. A finance leader, a sales team, or a technology function. Price the cost and the time it takes to hire them.
5. Hidden turnover
Headline turnover can look healthy while one team or one level loses people fast. Look at turnover by team, by tenure, and by role.
6. Structure that will not scale
An organization built around the founder often stops working as the company grows. Reporting lines, spans of control, and missing leadership roles all affect how fast the plan can move.
What a workforce assessment covers
- Organization structure and reporting lines
- Headcount cost and pay against market
- Turnover and tenure patterns
- Contractor use and classification risk
- Key people and retention risk
- Gaps between today's workforce and the plan
When to do it
Ideally during confirmatory diligence, so the findings can shape price, terms, and retention plans. At the latest, before close, so the first 100 days start with a plan already in hand.
Assessing a target?
We deliver workforce due diligence on your timeline, under confidentiality.