What Commercial Diligence Misses About Marketing

Quality of earnings tells you the revenue was real. Commercial diligence tells you the market is attractive. Neither reliably answers the question that determines whether the growth case survives the first year: is the demand engine durable, or is it a set of conditions that happen to be holding?

The distinction matters because marketing is one of the few functions where the reported performance and the underlying reality can diverge for years without anyone noticing. Here’s what to examine.

Concentration, in three forms

Channel. If more than roughly half of new customer acquisition comes from a single channel, the growth case is a bet on that channel’s continued economics. Paid search costs rise. Algorithms change. A platform policy shift can remove a third of demand in a quarter with no warning and no recourse.

Account. Ask what share of revenue came from the top ten customers and how they were acquired. Concentration acquired through founder relationships is a different risk than concentration acquired through a repeatable process.

Person. Ask who personally sourced the largest deals. If the answer is the founder, you are buying a relationship book, and that book has a retention clause attached to it whether or not anyone wrote one.

Whether acquisition cost is trending the wrong way

Get customer acquisition cost by cohort, by quarter, for at least eight quarters. Not cost per lead. Fully loaded cost per acquired customer, including agency fees and internal salary.

A business growing revenue while acquisition cost climbs steadily is buying its growth, and the price is going up. That trajectory is often invisible in the P&L because rising volume masks deteriorating unit economics, and it’s the single most common thing a marketing diligence pass catches that a financial one doesn’t.

Pair it with payback period. Growth funded by customers who take longer and longer to pay back is a working capital problem dressed as a growth story. The broader version of this question.

Whether the numbers reconcile at all

Ask for marketing-attributed revenue and compare it to what the accounting system recorded. If the platforms and the CRM together claim more than finance booked, the reporting is fiction, and every operating decision the target has made was made on that fiction.

This is not a small finding. It means the historical marketing decisions in the data room were made without reliable information, and it means you’ll be rebuilding measurement in the first hundred days before you can trust anything.

What’s rented versus owned

Separate demand that stops when spend stops from demand that doesn’t.

Rented: paid search, paid social, affiliates, most partnerships. Turn off the money and it ends within days.

Owned: organic search rankings, an engaged email list, brand recall, review inventory, referral flow from existing customers, content that ranks.

A business that is entirely rented has no floor. A business with meaningful owned demand has a base that survives a budget cut, which matters enormously in a downside case.

The retention question marketing usually answers

Look at retention by acquisition channel rather than in aggregate. Channels that produce cheap customers frequently produce customers who churn, and the blended retention number hides it.

If discount-driven or lowest-intent channels are producing the volume growth, revenue quality is deteriorating underneath a flattering top line.

Key person and key vendor risk

Two questions that take a minute each and regularly change the picture.

Who holds the logins? If the ad accounts, domain, analytics and CRM administration sit with an agency or a departing founder, you have a post-close continuity problem that nobody has scheduled.

And is there a single agency doing the work with no internal counterpart? That’s a dependency with pricing power, and it will discover that pricing power roughly two weeks after the deal is announced.

What to actually ask for

A short list that produces most of the signal: customer acquisition cost by channel by quarter for eight quarters, retention by acquisition channel, marketing-attributed revenue reconciled to booked revenue, a list of every marketing vendor with contract terms and notice periods, an inventory of who controls which accounts, and the source of the top ten deals by revenue.

If the target cannot produce those, that difficulty is itself the finding. It means nobody has been managing marketing as a system, which is a risk before close and an opportunity after it. What the first hundred days should do about it.