This article are provided for information purposes only, and are not intended as legal advice.

How to prepare your business for sale

December 17th, 2008

Before you list your company for sale you will need to get your affairs in order.  Here is a list which is not all inclusive but is a start of what you need to do:

physical location – clean up the office and the warehouse.  Organize it so that it is nice and neat.  Through out old boxes and old files which are beyond the statue of limitations and are not longer required to be kept.

accounting – prepare internal financial statements and have three years of tax returns and externally prepared financial statements.  If you are using a bookkeeper and you want to sell the business, you should consider using a CA or CPA to prepare your financial statements.  In some areas, there are other designations such as CGA which are allowed to prepare the financial statements as well.  Using a professional to prepare the financial statements is viewed by a prospective buyers as more reliable than internal financial statements.

prepare summary of top 10 customers by revenue.  You do not need to identify the customers names at this time

prepare a summary of top 10 suppliers by dollar value of purchases.  This shows how economically dependable you are on your suppliers

summary of all leases that you have

summary of key staff by position and age and background

summary of fixed assets by age, original cost, fair market value of current equipment

summary of inventory currently on hand, approximate age of inventory, how much is slow moving inventory, has it been included in inventory or has it been written off

if you have been audited by a government agency recently, provide documents because this shows that you have passed a review even if there are adjustments, it is unlikely that this particular government agency (whether is it sales tax or income tax) will re-audit those same

list of major competitors and how you rank in size and quality from others.  What makes you different.

If you get this information in advance, you can then prepare a summary of your business.  The more information that you prepare, the easier it is for someone to decide if they are interested in buying your business.  Remember, the summary document is used to entice an investor to want to buy your business because it sounds like it is an excellent opportunity.  If you do not prepare anything, the buyer will wonder what is for sale and they may over look your opportunity because they did not understand the potential with your business.

Filed under: Sell a business — Gary Landa @ 11:20 am

1 Comment »

  1. One mistake I often see is owners NOT reporting cash sales. It is very difficult to prove cash unless shown in deposits and tax returns. So very important when planning to sell make sure you report ALL income.

    Comment by Sell a Business — December 18, 2008 @ 12:22 pm

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