What Do You Need?

So you’re thinking of selling your small business and moving on to bigger and better things in life. But what kind of documentation do you need to fill in before putting your business on the market?

There are few rules when it comes to this, but there are several documents you need to have before you can pursue a sale.

The first step is to get a formal business appraisal so that you know roughly what your business is worth. To do this, the person appraising your business will first need a couple of documents including an adjusted balance sheet and an idea of your discretionary income.

This will show the numbers from the last three years tax returns with your salary added on. It also takes into account depreciation deductions, contributions, interest expense, interest income etc.

You can ask your accountant to sort out an adjusted balance sheet if you wish. This adjusts your company’s assets to fair market value and takes out assets your buyer will not get in the deal e.g. leased equipment.

Next, you need to hire a business appraiser to give you an idea of your company’s market value – also lending credibility to your sale prices if you go ahead with the sale.

Who’s Help Do You Need?

If you do decide to sell, selling it as an asset sale rather than a sale of a business entity may be better as it would give the buyer tax advantages and frees them from liability. However, asset sales require more planning.

You now need a business broker to help prepare an offering memorandum which details what your business is as well as the tax returns, the statement of seller’s discretionary income, balance sheet you have already put together and all contracts that pertain to the future running of your company.

You finally need a confidentiality agreement for prospective buyers to sign before you provide them with other documentation. This guarantees that your business being for sale will remain confidential as this could have effects on current operations within your firm if you have not yet announced the sale.

Your broker will also help you identify possible purchasers. But you shouldn’t assume your buyer has the financial ability to buy your business. It would be best to ask for a signed financial statement and examine it carefully.

Once you get people offering to buy your company, get your business attorney involved to review and approve them and go over any contracts you are asking them to sign as part of the sale.

Once an offer has been accepted, all that’s left is to decide deadlines for each step of the sale through to the closing date, and you’re done.

What Do You Think?

About to sell your business and have questions? Is there anything else you think it’s useful to bear in mind when selling your business? Have your dealings will selling your business always run smoothly? Leave your comments here.

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