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

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.

All great points mentioned by others about having appropriate documents, etc., but I find one of the most important aspects to being successful is having realistic expectations. Selling the business will take time, possibly up to six months and longer, and it also takes commitment by giving a broker an exclusive listing, so that they can seriously put the time and money into getting it sold, as opposed to the seller giving 10 brokers all open listings and giving themselves the right to sell it "by owner". One of the most important elements of selling a business and being successful is pricing the business to sell. A seller can have all their tax returns, sales tax receipts, inventory and invoice bills, etc., but nothing makes sense unless the seller is actually motivated to get the business sold, and only then will it sell.

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.

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.

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.

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)

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.