A lot of owners are concerned about this aspect of selling their business. Perhaps they aren’t the best record keepers in the world, so they are worried about presenting an incomplete picture. Or maybe they feel like they don’t want to show people their private information. Sometimes people are concerned about their tax returns being ‘not quite accurate’.
Here’s the deal. You are selling your business to somebody for a substantial amount of money. They don’t know you, they don’t know your business, and they need to feel comfortable that the business they are buying is just like you say it is. That means that you need to show as much proof and make the buyer as comfortable as you possibly can. Yes, that means handing over confidential financials, which are often co-mingled with personal funds. That means letting somebody see how much money you make, how much you report to the government, and what deductions you claim. Basically, if you have something to hide in the business financials, it’s going to come out. From not paying taxes, to paying employees under the table, your broker and potential buyer is going to see all of that.
The best thing to do is to be completely honest about how you run your business, and what money is coming and going. The most common documents that sellers provide are Point of Sales reports from their cash register or credit card processing company, tax returns, bank records, and profit and loss statements for the past three years. You should also have an equipment list of what comes with the business, and your estimated valueHopefully, these statements will support the initial numbers that you provided regarding sales volumes and expenses, and if not, you need to figure out how to prove the information to the purchaser.
Additionally, the buyer is going to want to see a copy of your lease if it is getting assigned to them, well as any other contracts that you have that they will be assuming. (Equipment leases, credit card processor charges, etc) Each sale is going to be a little different, but if you gather these documents prior to meeting with the broker to list your business for sale, you will be well prepared to move forward.