Books and Records – a Business Owner’s Guide When Selling Their Business

So you have decided it is time to sell your business. You have discussed the sale with your attorney and accountant. You have interviewed local business brokers and educated yourself on the process of selling your company. You have chosen an experienced business broker who understands your need for confidentiality and has provided a reasonable valuation assessment (and you’ve done some soul-searching regarding your price expectations for the business). It’s time to go to market. Or is it?

But wait. Let’s pause for a moment.

Now is the time to get your business files organized.

How you present your company information can affect the sale price of your business! As your broker has told you, your business’ valuation includes a measure of the buyer’s risk. Companies with records are that are disorganized or incomplete appear more risky to prospective buyers than their counterparts. Take the time to put update your files and put them in the best possible light.

Here is a quick list of items typically requested by a prospective buyer during their review period:

1)Last three years corporate tax returns and profit & loss statements
2)Last three years discretionary earnings statements
3)Current year-to-date financial statements including profit & loss statement and balance sheet.
4)Current list of major equipment and furniture, including value
5)List of any existing liens
6)Aging accounts receivable report
7)List of all outstanding deposits and amounts.
8)Employee list – including salaries, benefits, length of employment and copies of any employment agreements
9)Copy of all business insurance policies.
10)Copy of building lease and any addendums.
11)Franchise agreement
12)Copy of all equipment leases.
13)Copy of any licenses, certifications or registrations required for the business.
14)Management records such as price lists, sales reports, inventory lists, operations manuals, etc
15)Current client lists (specific client names can be withheld until the end of the review period)
16)Lists of major suppliers and distributors

Now is the time to start your preparation, engage your accountant (if needed) and collect information required for a prospective buyer’s proper review. Your organization skills will pay off when a qualified purchaser knocks on your door and sees how prepared you are. Clean books and records, presented in an organized fashion (invest in a three-ring binder, a hole punch and dividers!), will give buyers confidence and pay you huge dividends at the closing table.