Preparing to Sell Your Business: A Guide for Owners

If you're considering selling your business, it's important to understand that the process can be more complex than you might expect. When a potential buyer shows interest and makes an offer, they will conduct due diligence. This means they'll scrutinize every detail—from tax filings, which you'll need to authorize the IRS to release, to various contracts and lease agreements. Remember, it's a standard practice to verify the provided information, so be ready to dig up documents you might not have seen in years.

You may encounter situations where a buyer requests information you either can't provide or choose not to—like proprietary recipes or formulas. These should only be shared post-transaction, ensuring your valuable secrets are safe until the deal is finalized.

Utilizing the expertise of a professional M&A advisor or business broker can be invaluable. They can guide you on what to prepare, unlike generic online checklists which often include unnecessary items, wasting your time.

Be proactive in gathering essential documents like property deeds, tax returns, profit and loss statements, and balance sheets for the past seven years. Include anything relevant to your business operations, such as sales tax records, contracts, and any liens on your property—ensure these are cleared up as unresolved liens can complicate transactions.

Organize everything in one place, adding to it as necessary.

Consider converting these documents to a secure electronic format.? Using an electronic system that's confidential allows you to keep everything managed in one spot and keep an eye on who is taking look at your documents. Also gives you the power to turn off the access at a moments notice. You're in control. Plus everything ends up in one place. ? If you're concerned regarding the security of doing this, discuss the benefits and risks of this approach with your accountant or attorney. Using a digital data room can streamline the process, allowing for easy updates and monitoring access.

When due diligence begins, let the buyer lead with their requests. Be transparent about items you cannot provide. If certain documents are crucial and you're unable to produce them, it's better to address these issues early. Transparency can prevent potential deal-breakers later in the process, saving both parties time and effort.

Remember, being thoroughly prepared not only eases the due diligence process but also significantly enhances your chances of a successful business sale. Be thorough, be proactive, and be ready to navigate through the intricacies of selling your business.