Selling My Small Business: What Should I Have Ready To Be Successful?

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Selling My Small Business: What Should I Have Ready To Be Successful?

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Comments & Replies: 6     Views: 4293     Posted By: Peter Siegel MBA  

When selling a small to mid-sized business, owners should have their paperwork and financial information ready to go! They should also have a short business plan of past history, current operations, and potential for the future. In this BizBen Discussion several advisors and intermediaries weigh in.

Topics: Selling A Business     Tags: business brokersfor sale by ownerselling a business




What you absolutely need in terms of paperwork is your business financials, including:

1) balance sheets and profit and loss statements going back at least three years and as current as possible;

2) supporting documentation such as accounts receivables and payables ledgers;

3) copies of any leases and other written agreements with vendors as well as employees, for which the new owner may be responsible;

4) list of assets, including capital equipment and inventory, to be included in the sale;

5) a general overview of the business with information about how long in operation, how many employees, hours of operation, explanation of what the company offers to the market, description of the customer base and summary of financial information. This document also should include a mention of how the company has performed in the past few years and what is expected in terms of growth in the future.

The owner selling himself (or herself) needs to have a “buyer non-disclosure” form that should be signed by anyone who wants to learn about the business offering.

Vincent Murphy Business Broker
Vincent Murphy Business Broker

Contributor: Business Appraisals, Valuations Advisor


You will need at least three year-end financial statements and the most current statement (Balance Sheet and P&L). These should be reviewed by your accountant to make sure there are no errors or emissions. Items that could be incorrect are inventory, work in progress and equipment lists. Also have your accountant review your Accounts Receivables and break them down by age. You will eventually have to produce your tax returns so again let you accountant review them and make sure they match the financial statements. Besides items, you want your business to look its best, so have a friend (someone that doesn’t see it every day) tell you what stands out as needing repair, painting or replacement. Buyers are impressed with clean and attractive businesses.

Replies To This Comment
In addition to what Bob mentions, it’s very helpful to have:

1. Monthly sales figures for the last 36 months
2. Details regarding any customer database (number of customer contacts, how recent the contacts are, and the geographic distribution of the contacts)
3. A complete, detailed, line-by-line itemized FF&E list (furniture, fixtures, and equipment) of ALL assets, with a reality-based cost to replace each item with like kind, condition, and age of asset. (In short, what the seller would need to receive from his insurer in case everything was destroyed in a fire.) This is its real value to a buyer, as it answers part of the question: “Start a new business or buy an existing one?”
4. Three years of tax returns (important for obtaining purchase-money pre-approval for the business). The buyer won’t see these until later in the process, maybe not until due diligence; but, the broker can use them to get financing pre-approval, which will greatly increase the response to the “business for sale” ads.
5. Employees — position, responsibilities, qualifications (education, training, experience, skills, etc.), annual wage/salary, length of employment, but NOT names. Designate who is a manager — or could be when the current owner leaves.



Contributor: Business Broker, Northern California


Each business being sold is different but some common items to consider include:

– List of Furniture, Fixtures and Equipment at original cost.
– Copies of Equipment Leases (If applicable)
– Complete Copy of Lease (If applicable)
– Copy of Lease Assignment (If applicable)
– Copy of proposed new lease (If applicable).
– Samples of documents you use to market and promote your business
– Corporate, Partnership or Spouse Approval to sell the business
– Copies of Notes to be Assumed by Buyer
– Copy of Franchise Agreement, Franchise Application and FDD (If applicable)


From the legal side it’s a good idea to make sure you have the following available in addition to the other documents mentioned below:

-All corporate formation documents (articles of incorporation or articles of organization)
-Any partnership or shareholder agreements between you and other owners of the company
-Copies of all of your corporate records (minutes, resolutions, share ledger, etc.)
-If your share ledger is not clear, and many are not, a capitalization table showing who has owned what shares, with a separate column for each time there was a new shareholder/investment that changed things.
-Check that your entity (if a corporation or LLC) is in good standing, and if formed outside California that it is registered in California if need be. You don’t necessarily need a formal certificate of good standing. Just make sure the entity is active so if the buyer does their due diligence you aren’t in for a surprise.

The lists of standard documents below are a good starting point. If I am on the buying side I’ll always want to see any employment agreements/offer letters/handbooks, any material agreements with customers or suppliers and explanations of any litigation if there is a history of it with your company. A buyer who is well represented will find out about any past or pending legal issues so it’s worthwhile to be prepared and make sure you’re disclosing properly.


Another very important item that a seller can have ready is pre-approval for buyer financing from a third-party lender or niche financial consultant. Not only does this help with an objective opinion of what the business is worth, but, it expedites the entire contract and due diligence process. The best way to obtain purchase-money pre-qualification is to submit three years of the selling company’s tax returns to a business purchase finance expert (such as www.bizbuyfinancing.com or phone Peter Siegel in California direct at 866-270-6278) to get a purchase loan commitment, subject to the eventual buyer’s creditworthiness.

Contributor: Broker/Consultant: Elderly Care Services


What should a Seller have ready to sell a business? Before anything else is prepared a seller needs to have a very very solid understanding of what their motivation is to sell and what they expect to achieve through the sale of their business. Without the right expectations and goals in place, no amount of documents, preparation and great looking financials will overcome an unrealistic seller.

Replies To This Comment
Great point Joel. I always tell my sellers, “hey, there is nothing wrong with just saying I’m burnt out.” Some sellers are apprehensive of saying they have to sell due to a family emergency, because they don’t want the buyer to think it’s a fire sell. I try to check up on the sellers occasionally during the listing to remind them I am still aggressively marketing their store, and it’s easier to ask for a price reduction (if needed) if I have good communication with them already.

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