Share This Info:  

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

Share This Page   •   See All Discussions   •   See All Contributors   •   All New Discussions & Comments

Comments & Replies: 6     Views: 4048     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 brokers, for sale by owner, selling 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.

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.



  Helpful Resources To Assist In Selling And Buying California Businesses

Janet Carrera - Escrow & Bulk Sale Services - SF Bay Area

Redwood Escrow Services, Inc. is a full service, licensed independent escrow company. We are EAFC Fidelity bonded, fully insured & licensed with the Department of Corporations. Committed to offering our clients the most comprehensive variety of escrow services available. Phone Janet at 510-247-0741.

Helen Yoo: Escrow & Bulk Sale Services - Southern California

New Century Escrow, Inc. is a fully licensed & bonded independent escrow company. Over 20 years combined experience in handling bulk escrow transactions. Multi-lingual staff that speaks your language, including Korean, Chinese, Vietnamese. Call Helen Yoo direct at 626-890-1151.

Diane Boudreau-Tschetter: Escrow And Bulk Sale Services

California Business Escrow, Inc. is a full service independent escrow company serving all of California and has expertise in a wide range of escrows. Our team prides itself on providing an exceptional escrow experience. For more info phone Diane Boudreau-Tschetter at 888-383-3331 or 209-838-1100.

Willard Michlin, CPA, Certified Fraud Examiner, Due Diligence Services

Willard Michlin, CPA #106752, offers buyers step by step training & assistance in doing Due Diligence Services when they are thinking of making an offer, or are in process of investigating a business purchase. He helps to determine the actual net profit even when there is cash. Call 800-864-0420.

Brad Steinberg, Broker - Laundromat Specialists

Laundry specialists - founded in 1968 by three laundry professionals, PWS is a family-owned corporation. Through the years it has grown to become the largest vended laundry equipment distributor in the United States. Call Brad Steinberg at 323-721-8832 to sell or buy a coin or card laundromat.

Mark Chatow, Esq.: Legal Services For Buying, Selling Businesses

Mark has a broad range of small business purchase & sale experience from analyzing potential acquisition targets to successfully guiding buyers and sellers through the purchase & sale of small businesses. Mark can assist with contracts, negotiations, legal matters, etc. Reach Mark at 949-478-8393.

Elizabeth McGovern: Escrow Services - SF Bay Area

McGovern Escrow Services, Inc., is a leading independent escrow company. We are a trusted partner with our clients, assisting them through the tangled bulk sale & liquor license transfer process. We provide attentive, quality & innovative customer service. Phone Elizabeth McGovern at 415-735-3645.


  Related Articles, Events, Blog Posts, Discussions, Videos, Interviews

Financing A Business Purchase With Limited Or No Real Estate Collateral

In my experience working with the "right banks and financial institutions" repayment ability sometimes overrules collateral pledged by someone needing financing for a business purchase or a down payment. Peter Siegel, MBA (Business Purchase Financing Expert) at 866-270-6278 shares his experience.

How Do I Navigate Through The Negotiation Process When Buying A Business?

Negotiating the terms of a business deal is a delicate process, where one wrong move can cost you the business that you wanted to purchase. Peter Siegel, MBA (BizBen ProBuy Program) discusses the ins and outs of negotiations, and how to work well with the seller to get a deal done.

How To Determine Whether The Buyer For Your Business For Sale Is Sincere

A problem owners encounter when offering a CA business for sale is that not all so-called business buyers are qualified to make the purchase. It's frustrating and costly to waste time showing non-qualified buyers the business. Here are ways to identify time wasters so the focus is on real buyers.

Find Out Why 80% Of California Business Buyers Never Find And Buy A Business

First the dreaded statistic: 80% of all California business buyers looking to buy a small to mid-sized business in California never end up doing so! Peter Siegel, MBA BizBen Founder And Director at 866-270-6278 covers successful tactics all business buyers of small businesses should utilize.

Uncover Hidden Problems In Due Diligence When You Buy A Small Business

Most everyone who's decided to buy a small business in California knows the importance of due diligence. That involves close examination of a business prior to removing contingencies. But not everyone knows how to uncover problems that are not obvious. Here are five of the most common hidden issues.

What Should I Do If Other Buyers Are Trying To Buy The Same Business As Me?

Buying a small business is hard enough when there is no competition, so how might a buyer navigate the process when there is additional competition from other buyers? Potential small business buyers are offered a few key ways that a buyer can beat out other potential business buyers in this article.

Absentee Run Small Businesses - Is That Really A Possibility For Buyers?

Is buying a absentee run small business really a possibility? Peter Siegel (BizBen ProBuy Director) gets asked this question a lot in his consulting sessions with business buyers. Read more about what other Advisors and Intermediaries feel about this topic on this popular BizBen Discussion!

Sellers Ask: How Long Should I Wait For The Buyer To Do Their Due Diligence?

Business sellers & buyers ask the question in the buying process-how long should I ask for due-diligence when buying a small business? The answer really depends on several factors. They include: type of business, demand for the business, complexity of the business. Advisors weigh in on this topic.

See All News, Tips And Events

Tim Cunha Business Brokerage
Cannabis Consulting Due Diligence Service
Adam Orhun Business Broker
Larry Larsen Laundromat Broker







Auto Related
Business Services
Children Related
Communication Related
Computer, Internet Related
Construction Related
Entertainment Related
Financial Services
Health, Beauty Related
Home Improvement Related
Maintenance Related
Manufacturing Related
Media, Publishing Related
Pet Related
Photography/Video Related
Real Estate Services
Restaurant, Food Related
Retail Related
Service Related
Sports Related
Transportation Related
Travel Related
Wholesale Related

Auto Body Shops
Auto Repair Shops
Bakeries
Bars, Sports Bars
Cafe Restaurants
Car Washes
Cleaning Services
Clothing, Apparel Stores
Coffee Shops
Convenience Stores
Deli Restaurants
Discount, Dollar Stores
Dry Cleaners
eCommerce Websites
Fast Food Restaurants
Florists, Flower Shops
Full Service Restaurants
Gas Stations
Gift Shops
Gyms, Fitness Facilities
Home Health Agencies
Hotels/Motels
Ice Cream Shops
Juice, Smoothie Shops
Laundromats
Liquor Stores
Markets, Marts
Nightclubs
Pizza Restaurants
Postal, Shipping Stores
Preschools, Day Care
Print Shops
Salons, Beauty Shops
Sandwich Shops
Smog Test Only Shops
Smoke Shops
Spas, Med Spas
Sushi Restaurants
Tire Shops
Towing Services
Vending Routes
Wireless, Cellular Shops
Yogurt Shops

Alameda
Alpine
Amador
Butte
Calaveras
Colusa
Contra Costa
Del Norte
El Dorado
Fresno
Glenn
Humboldt
Imperial
Inyo
Kern
Kings
Lake
Lassen
Los Angeles
Madera
Marin
Mariposa
Mendocino
Merced
Modoc
Mono
Monterey
Napa
Nevada
Orange
Placer
Plumas
Riverside
Sacramento
San Benito
San Bernardino
San Diego
San Francisco
San Joaquin
San Luis Obis
San Mateo
Santa Barbara
Santa Clara
Santa Cruz
Shasta
Sierra
Siskiyou
Solano
Sonoma
Stanislaus
Sutter
Tehama
Trinity
Tulare
Tuolumne
Ventura
Yolo
Yuba

0 to $99,999
$100,000 to $249,999
$250,000 to $499,999
$500,000 to $999,999
$1 million to $2 million
over $2 million




BizBen - Where California Deals Get Done! 888-212-4747
7172 Regional Street #364 · Dublin, CA. 94568
BizBen · Copyright © 1994 - 2017, All Rights Reserved

                 
Sign Up Today - For Our FREE BizBen Weekly Email Newsletter
Includes The Best Info On Buying, Selling, Valuing, Financing California Businesses:
Articles, Blog Posts, Podcasts, Videos/Vlogs, Discussions, Q&A, Workshops, Webinars,
Resources. Watch For An Email Confirmation After Signing Up Above. Thank you.


Please confirm your registration by clicking the link we've sent to .

If you can't see it, please check your junk mail folder.

If you have any problems registering, or need assistance with your new BizBen User Account please phone BizBen Customer Support at 888-212-4747.



First Name:*
Last Name:*
Email Address:*
Confirm Email:*
Create Password:*
Confirm Password:*
Phone:
(   
 


You Are A:
Individual
 
Intermediary
 

Email Address:
Password:
 
Search BizBen.com

500 New & Refreshed Detailed Postings Daily
Over 2500 Resources Available On BizBen
Since 1994. Where California Deals Get Done!
5 Myths About Selling A California Business: Best Tips For Sellers & Bro...
Financing A Business Purchase With Limited Or No Real Estate Collateral