Prepare Your Financials to Sell Your Business
So, you’ve hired a broker, received a business valuation and quietly gone to market in search of a buyer for your business.
You’ve answered a myriad of buyer’s questions, hosted successful buyer-seller meetings and negotiated the price and terms of a sale with a buyer.
You’ve engaged an attorney, reviewed the purchase agreement in detail, signed documents and received verification of the buyer’s escrow deposit.
Seems like you’re almost done! No. Not quite. In fact, this is where the real work begins.
The next phase of the deal is the buyer’s due diligence period, which typically lasts from 2-6 weeks, depending on the size and complexity of the deal. This is where the buyer gets to look under the covers and take a deep dive into the legal, financial and operational aspects of the business.
This is also where deals die.
So, how can you be better prepared as a seller for due diligence? Take some time before the due diligence process even begins to get the following items in order. Be prompt in providing information to the buyer. Don’t sugarcoat it or hide things. Be organized. That way, you can quickly provide information to the buyer and show them just how well-organized (and valuable!) your company really is.
Documents Most Buyers Will Request During Due Diligence
Here are general financials and other documents that you should prepare when you decide to sell a business:
- Bank Statements: Most buyers will request personal bank statements for at least the last two-plus years to prove the business’s historical cash flow.
- Insurance policies: Buyers will want to see invoices for legal/accounting services as well as full insurance policies in place for the last two years.
- Assets: Buyers will review a list of the business assets including supplies, equipment, furniture, fixture and inventory. They also may want to review any service contracts that you have.
- Vehicles: Buyers will want a list of all your vehicle make and models, when the vehicle was put into service, the current mileage, and any remaining lease terms or loan balances.
- Rental/lease agreements: If you have any premise or professional leases or rental agreements, buyers will want to see details of the contracts.
- QuickBooks: Most buyers will want to get a flash drive that contains a copy of your QuickBooks files, if possible.
- Tax returns: You will need to provide the last two years of sales tax returns as well as other federal and state tax documents. Buyers will request corporate tax returns for the last three years as well.
- Employees: Buyers will want a list of employees (names can be redacted), along with the job description, salary and date of employment for each.
- Billing statements: Buyers typically request credit card billing statements from your merchant account for the last year or so.
- Owner’s Cash Flow: The buyer will want to see the details of how you calculated your owner’s discretionary cash flow and to see supporting documentation.
Don’t waste another day and talk to a Sunbelt South Florida broker today!
Sunbelt Business Brokers of West Palm Beach provides dedicated business brokerage services for all of your selling needs. Whether you are an established business owner nearing retirement and looking to sell, or an ambitious entrepreneur seeking your next investment opportunity, there is no reason to look beyond Sunbelt Business Brokers. Visit us at 800 Village Square Crossing
Suite 216 Palm Beach Gardens, FL 33410 or contact us at (561) 832-9222.