The Informative Seller: What your Buyers Need to Know
There is more to selling a business than just propping up a "for
sale" sign and waiting for the offers to roll in. When preparing
your business for sale, you must collect a vast amount of data
and make it available to buyers. A well documented business
sells! The following is a list of information you will need to
compile to present to potential buyers:
Two to three years of financial statements. It is safe to assume
that any interested buyer will want to know about the financial
status of your business: what it makes (if anything);
depreciation, staff wages, owner's wages, and tax liabilities.
Collect your business's financial information, including: profit
and loss statements; balance sheets; depreciation schedule;
staff wages and expenses (benefits, etc.); owners' wages and
expenses; and owners' personal tax returns. This will provide a
potential buyer with a real bird's eye view of where your
business's costs exist, and will help to make their decision.
Year-to-date sales figures. A buyer will want to see how your
business has grown over the years (or months). Monthly tabs
allow the buyer to see when what time of year is more active
than others.
Current rent and outgoing expenses. These tie into financial
statements. Does your business rent or lease office space, or
equipment? These monthly expenses impact the bottom line and
must be provided to a potential buyer.
Details on managing personnel. You know your employees best.
Some buyers plan to maintain current staff; some bring in their
own people. In either case, you should provide a potential buyer
with details on turn-around, staffing issues and recruitment
processes.
Owners' hours. Do you work 80 hours a week? Do you have to? A
potential buyer will definitely be interested in knowing how
much supervision and face time he or she must invest on a weekly
basis.
Plant and equipment schedule. Let potential buyers know about
vendors, suppliers, and maintenance schedules on any equipment
related to the business.
Estimate of stock. Stock and inventory is typically figured in
the sale price of the business. If you're letting inventory
levels decrease due to the impending sale, let potential buyers
know. When the doors reopen, they'll need to be stocked and
ready for business.
Copy of current lease. Serious potential buyers will need to see
a copy of the lease. They will also need to know if it will be
transferable or if they will need to renegotiate.
Hours of operations. How often are you open? A potential buyer
needs to know what your regular schedule is and what your
customers expect.
Licenses required. It will be the buyer's responsibility to
maintain licenses. Let the interested buyer know what type of
licenses, fees, subscriptions etc. that will be required to
maintain the business.
Ongoing advertising. What do you spend on advertising? Do you
place newspaper ads or radio spots? Do you simply go door to
door? What is the return on that investment? These will all be
questions an interested buyer will likely ask. Be prepared to
provide answers.
Selling a Franchise? A buyer will need to know what type of
transfer fees will be required, monthly royalty fees and how
much corporate training is mandatory when they purchase the
business. Typically training is done at the franchises corporate
headquarters, which could mean air travel, hotel and meals for
the buyer for several weeks at his or her expense. This
information will be crucial for a buyer if they intend to use a
financial institution for lending purposes. Providing potential
buyers with everything they need will make the process easier
for them and quicker for you.