5. Required information and documents when selling a business

If you are considering selling a business, it is important to remember that prospective buyers are looking for clear, tangible facts that will convince them that your business will be a profitable investment. Although they may initially be attracted to your business for other reasons, their primary interest will be the bottom line. This means that you need to provide them with comprehensive, organized documentation, and solid bookkeeping that demonstrate the performance of your business over time and back up your asking price.

Preparing solid financials ahead of time will help determine a fair asking price, while giving you the opportunity to identify gaps or shortcomings.

In order to provide an accurate assessment of your business, you will need to prepare your financial statements, ideally for the past two to three years. Hopefully, you have been keeping your business records in order. If not, roll up your sleeves, gather your papers together, and prepare to get organized before listing your business. You will be glad you did, as this will make the selling process go much more smoothly.

To ensure the integrity of your financial records, it would be wise to seek the assistance of a small business CPA. A professional CPA can help you identify any gaps or shortcomings that could be improved. Moreover, buyers often place more weight on financials that have been scrutinized by a qualified accounting professional. Professionally audited financials often have more validity and potential to increase your asking price.

Compile the following documents in preparation for selling a business:

• Profit & Loss Statements for the current and past 2-3 years
• Current balance sheet
• Cash flow statement
• Copy of the current lease
• Insurance policies
• Non-disclosure/confidentiality agreement
• Personal financial statement for buyer to complete
• Executive summary of the business overview
• Detailed profile describing the business
• Any additional documents to substantiate the financial representations
• Professional certificates
• Supplier and distributor contracts
• Employment agreements
• Offer to purchase agreement
• Note for any seller financing

Now it would also be a good time to talk to a professional business broker, who will explain you the market requirements, what the buyers are looking for, how to increase the marketability of your business, help you set a fair sale price and determine the best time to list your business for sale.

Buyers will expect to see documents proving your business is profitable. Therefore, sound documentation and a well-grounded financial situation are key points in the sale process. At the same time, it will help you develop strategies that will increase the market value of your business and make it easier to sell.

If a prospective buyer requests confidential information, make sure to sign a NDA before giving this information.