When it comes to selling a business, preparation is key. As a business broker, one of our primary roles is to ensure that the transition is smooth and that the business is presented in the best possible light to potential buyers. To achieve this, there are several crucial pieces of documentation and information that a client must provide before bringing their business to market, as well as several documents and information that will need to be provided during Due Diligence.
Below is a comprehensive guide to help business owners prepare:
Prior to going to Market
Financial Statements
Historical Financials
- Profit and Loss Statements: These should cover at least the last three years and be detailed enough to show revenue, cost of goods sold, operating expenses, and net profit.
- Balance Sheets: Include assets, liabilities, and equity for the same period.
Tax Returns
- Full copies of business tax returns for the last three years.
Operational Information
Employee Information
- List of employees, including roles, salaries, and length of service.
Inventory and Assets
- Detailed inventory list with valuation.
- List of major assets, including equipment, vehicles, and property.
- Any leases or rental agreements for equipment or property.
Documents to have prepared for Due Diligence
Operational Information
Employee Information
- Employee contracts and agreements.
- Summary of any outstanding employee-related liabilities (e.g., unpaid leave, bonuses).
Legal and Compliance Documentation
- Contracts and Agreements
- Copies of all current contracts, including vendor agreements, customer contracts, and service agreements.
- Leases for any premises occupied by the business.
- Licenses and permits required for operation.
Legal Disputes
- Information on any ongoing or past legal disputes, including lawsuits or claims against the business.
Market and Customer Information
- Customer Data
- List of key customers with purchase history.
- Customer contracts or long-term agreements.
Market Analysis
- Information on market position, competition, and industry trends.
- Marketing and sales strategies, including any advertising materials.
Business Operations Manual
- Detailed description of business processes and standard operating procedures (SOPs).
- Information on any proprietary technology or processes.
Preparing a business for sale requires meticulous attention to detail and a comprehensive collection of documents that will provide potential buyers with a clear and accurate picture of the business's operations and financial health. By gathering and organising these documents ahead of time, business owners can facilitate a smoother, more efficient sale process and increase the likelihood of achieving a favourable outcome.
As a business broker, our job is to guide you through this preparation phase, ensuring that every necessary document is accounted for and that your business is presented in the best possible light. This preparation not only instils confidence in potential buyers but also positions the business for a successful transition to new ownership.