JOE D. Robertson
SCAL Business Broker

Below is a short list of the minimum documentation you will need to provide your business broker before he or she can begin marketing and representing your business for sale. Keep in mind that having everything prepared and completed before you market the business is essential. First, your broker will be able to better analyze your business for potential pitfalls giving them time to come up with solutions before problems arise or adjust the expectations of the sale to the seller. Second, there is nothing that dampens a buyer’s interest in a business more than waiting around for documentation.

Remember, buyers are looking at a variety of opportunities at the same time. They will grow tired of waiting and become frustrated (and possibly distrusting) if requests for information drag on and on. Finally, your business broker presents the best aspects of your business to a buyer much like the way a lawyer tries to win a court case. With more evidence to prove your case, the greatest chance for success! Don’t skimp and expect buyers to be impressed.

Profit and Loss statements for the past 3 years

This report (along with a Discretionary Earnings analysis which is created from the P & L) is the main evidence a seller and their broker will use to justify the company’s purchase price. In the past, parties have refused to share this information claiming it was proprietary or a vital business secret. Understand P&L are private information, but without the broker being able to review them and then share them with a potential buyer (at the appropriate time) in most cases, you will not sell your business.

Interim Profit and Loss statements.

Potential buyers will want to be assured that the business’s sales have not dramatically decreased since the business was put up for sale. This statement can also be a great device to allow the seller to prove how lean and profitable he or she can run the business.

Income Tax Return (Corporate or Schedule C)

In most sales, buyers will ask to take a look at the Federal Income Tax Returns. There are many companies whose Tax Returns do not match their P & L perfectly. This is information that must be known from the beginning of the sale. It is better to explain the situation to a potential buyer than have them feel the seller was not upfront with them. If the seller is unwilling to share Tax Returns at the appropriate time (after securing an offer) most buyers will not want to continue with the purchase.

Copy of Lease (including latest amendments and or assignments).

The lease can be a deal killer (especially if ignored until the later part of the sales process). Review your lease with your broker; find out if it is assignable. If it is not, you or your broker should contact the landlord and discuss the possibility of a new lease with a qualified buyer. Find out what the landlord is looking for in a buyer so your broker can use these standards to qualify any potential purchaser.

Complete list of Furniture, Fixtures and Equipment.

This list will be become part of the final purchase agreement. Having a completed list to review during a tour in the due diligence process will insure that the buyer and seller have no miscommunications regarding what is included and what is not included. Any equipment that is not fully owned by the business must be noted. If it is on loan from a distributor or being purchased through a capital lease, your broker and any potential buyer must be notified.

Remember, this is the bare minimum of documentation need to start marketing a business in most cases. I have a more detailed list, but not all parts of it are applicable to every type of business (e.g. Franchise agreement, Aging A/R report, copy of necessary licenses, ect.). As general rule, the more complex or large the operation, the greater the amount of information your broker will need.

As a final note, this list does not include the supplemental information the broker will need to understand the details of you operation (history, competitive edge over competition, employee details, etc.). Every brokerage has different interview processes with their sellers, but once again, the more information you give your broker the better equipped he or she is to represent your company in its best light.