Selling Your Business? Get Your Documents in Order

Prospective business buyers wont' simply take you on your word. You need to have documents ready to support every claim you make during the sales process. 

 

 

 

 

During the course of a business sale, sooner or later your prospective buyer will expect - or, put more accurately, the buyer will demand - to see "just the facts" about your business. Therefore, you will need to have all your documents completed and organized before the business ever hits the market.

The following checklist will help you assemble the documentation you need to be ready to share.

Step 1. Be aware of the documents you'll need to present during the sale process.

You may already have many of these documents complete and available, in which case you can check it off following chart’s document description. Otherwise, leave it unchecked and plan to work with professional sale team members (business broker, attorney, accountant and/or other intermediaries) so you'll be prepared when the documentation is needed.

Documents

   Non-Disclosure Confidentiality Agreement

   Personal Financial Statement Form for Buyer to Complete

 Offer-to-Purchase Agreement

   Note for Seller Financing

   Financial Statements for the Current and Past 2-3 Years

   Statement of Seller's Discretionary Earnings or Cash Flow

   Financial Ratios and Trends

   Accounts Payable and Accounts Receivables Aging Reports

   Inventory List with Value Detail

   List of Fixtures, Furnishings and Equipment with Value Detail

   Financial Statements for the Current and Past 2-3 Years

   Statement of Seller's Discretionary Earnings or Cash Flow

   Financial Ratios and Trends

   Accounts Payable and Accounts Receivables Aging Reports

   Inventory List with Value Detail

   List of Fixtures, Furnishings and Equipment with Value Detail

   Asset Depreciation Schedule from Tax Return

   Supplier and Distributor Contracts

   Client List and Major Client Contracts

   Staffing List with Hire Dates and Salaries; Employment Agreements

   Organization Chart

   Photos of Business

   List of Opportunities for Improvement with Revenue/Profit Projections for Each

   Business Formation Documents

   Corporate or Schedule C Tax Returns for Past 2-3 Years

   Building or Office Lease

   Equipment Leases and Maintenance Agreements

   Business Licenses, Certifications and Registrations

   Professional Certificates

   Insurance Policies

   Copies Proving Ownership of Patents, Trademarks and Other Intellectual Property

   Outstanding Loan Agreements

   Description of Liens

   Product/Service Descriptions and Price Lists

   Business Plan

   Marketing Plan and Samples of Marketing Materials

   Employment Policy Manual

   Business Procedures Manual

   Other Documents Unique to Your Business

Step 2. Assemble all documents so you're ready when the need arises - and it will!

The business description that you provide in early ads and communications will draw initial buyer interest, and your early personal assurances and explanations will inspire further interest. But it's highly unlikely that you'll receive any kind of interest commitment, let alone an offer or indication of purchase intention, until you turn over hard-copy versions explaining provable facts, figures, and financial statements for your business.

Vincent Murphy, Business Broker