Methodology
Most commercial diligence is a reading exercise. Someone reads the management presentation more carefully than the last person did, calls the references the seller chose, and writes it up.
We work in four layers, and each exists because the layer below it can be wrong. Reconstructed data can be technically accurate and tell you nothing. Primary evidence can be honest and unrepresentative. Observation catches what neither can, and none of the three decides anything alone.
The layers do not run at the same depth in every engagement, and the constraint is access. Before you have a seat at the table, we work from what a company reveals without meaning to. Under exclusivity, from what a seller agrees to open. After you own it, from everything.
What follows is the architecture. The implementation is the practice, so parts of it stay unwritten.
Layer one. Reconstruction
- What goes in
- Billing and subscription exports. CRM exports. Contract terms. And the entire observable surface of a software company: hiring patterns, release cadence, documentation depth, pricing page history, review site movement, the specifications in their own job adverts.
- What comes out
- Cohort retention rebuilt from source rather than accepted from a slide. Net revenue retention separated from logo retention. Concentration, and how it has moved. Discount discipline at renewal. Win rate and sales cycle by segment. The share of pipeline carrying a named next step and a date.
- What it changes for you
- You stop negotiating against numbers you cannot check. Every figure traces to source, so when you move on price you are moving on evidence a seller cannot argue with, rather than on a doubt they can talk you out of.
- Why it is hard
- A number means nothing until you know what normal looks like. Eighty-nine percent gross retention is excellent in one segment and a warning in another, and no published benchmark exists at this company size. The same reconstruction runs on every engagement, in the same way, which is what makes an output comparable across companies rather than merely internally consistent. A finding you cannot compare is an anecdote.
Layer two. Primary evidence
- What goes in
- Conversations, deliberately weighted away from the reference list. Churned customers, because they say what current customers are too polite to. Lost deals, because losses are unrehearsed. Former sales staff, because they know which deals closed for reasons the CRM does not record. Channel partners, because they see the competitive set from outside. Current customers last, and never only.
- What comes out
- Why customers actually bought, in their words rather than the company's. What renewal costs to earn. Which competitor was genuinely evaluated. What would have to break for them to leave. Every finding carries a confidence level and the class of source behind it, so a reader can see which conclusions rest on one voice and which rest on many.
- What it changes for you
- You hear the version of the company nobody prepared for you. In most engagements this is where the condition on the offer comes from, and it is almost never the risk the seller flagged in the room.
- Why it is hard
- Access is controlled by the seller, and reference calls are prepared. Most of the value sits in conversations a seller would not have arranged, which have to be found rather than requested. And the framing matters more than the volume: a poorly built interview produces agreement, and agreement is not evidence.
Layer three. Observation
- What goes in
- Live sales calls, across different stages of the funnel. Discovery, demo, negotiation.
- What comes out
- Whether the representative qualifies or accepts any meeting offered. Whether value is articulated or features are demonstrated. Whether the deal is won on value or on discount. What happens when a prospect raises price. Who has to be on the call for it to close, and how the conversation changes when they are not.
- What it changes for you
- You find out whether you are buying a company or a person, before you own the answer. No financial, legal or technical workstream reaches this question, and it decides more software acquisitions than any of them.
- Why it is hard
- Almost nobody does it, because it requires access a seller has no obligation to grant and a reader who knows what they are looking at. Documents record what a company believes about itself. Watching it sell shows what it does, and frequently shows the fix that has been available all along.
- The honest limit
- Live observation is qualitative signal, not measurement. It is always calibrated against layer one, never read alone, and the report says so in those words.
Layer four. Judgment
This is where the method stops and the reading begins.
Findings are scored against a standing model of commercial red flags, built from a decade of enterprise software sales and refined across every engagement. The model makes assessments comparable. It does not make the decision.
The decision is what the layers mean for this buyer, at this price, with this plan for the company afterwards. The same set of findings supports a walk for one buyer and a proceed at a lower price for another, and no framework resolves that. It is the part of the work that has to be earned rather than run.
- What it changes for you
- You get something you can take to an investment committee: a position, the conditions that would make the price work, and the reasoning underneath. Not a list of risks with the call handed back to you.
Where the method ends
Three things this method does not do, stated plainly because knowing the limits is part of trusting the output.
- It does not predict.
- It establishes what is true now and what would have to change. Everything past that is a forecast like any other.
- It does not replace financial, legal or technical diligence.
- It answers the commercial question and hands the rest to people who do those properly.
- It does not work without some seller cooperation at the full assessment level.
- The Commercial Thesis Review exists for the stage where you have none, and is honest about being narrower as a result.
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