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.
Non-Disclosure Confidentiality Agreement
Personal Financial Statement Form for Buyer to Complete
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
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
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
Copies Proving Ownership of Patents, Trademarks and Other Intellectual Property
Outstanding Loan Agreements
Description of Liens
Product/Service Descriptions and Price Lists
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.
Begin immediately to assemble all the documentation you'll need over the time period in front of you.
In next week’s installment of “Selling Your Small Business” we’ll help choose the experts that will make up your sales team.
Editor’s Note: This article is the seventh piece in a series taken from BizBuySell.com’s Guide to Selling Your Small Business. The guide is a comprehensive manual to help small business owners maximize their success when the day to sell arrives. Each Wednesday, Inc.com will publish a new section of the guide outlining BizBuySell.com’s best practices, from the initial planning stages of a sale all the way through negotiations and post-sale transition.