Selling a Business: A Checklist of the Crucial Factors You’ll Need to Consider
By Julija A.
June 19, 2023
Selling your business requires going through a sequence of well-defined steps. You need to proceed methodically so that you don’t miss out on key processes or make mistakes.
In the following selling a business checklist, you’ll learn more about determining the value of your business, preparing a statement that outlines why you want to sell it, and the various documentation you need to support its value. When selling a business, a checklist can be a lifesaver, so let’s look at what one should entail.
Preliminary Business Sale Preparations
When selling a business, it’s critical to get the price right. If you pitch too high, you won’t get any interest, and your company will remain on the market for too long.
Before you sell your LLC, you’ll want to make sure that it’s ready for viewing. This could include fixing up any interior or exterior issues with the property.
You’ll also want to make sure that:
- You have all the business documents you need for the sale.
- You understand the actual value of your business to prospective buyers.
- You know when you want to sell (timing the market can influence how much you get paid.)
- You’ve had a professional business valuation.
Sale Of Business Assets Checklist
Here is a business sale closing checklist:
1. Hire Advisors To Help Start the Business Sale Process
You’ll need to organize the following professionals and tell them about your intention to sell your business:
- Accountant – for filing all your business’s financial information in a professional manner.
- Business broker – an individual who acts a bit like a real-estate agent, finding the best price for your business and then taking a commission (usually around 10 percent on a $1 million enterprise).
- Valuation expert – a professional who understands what your business is really worth.
- Attorney – for making sure that you follow legal procedures for commercial sales.
2. Write Down Your Reasons for Selling
You’ll want to provide potential buyers with compelling reasons for the sale. These could include:
- The need to move to a different part of the country.
- Retirement.
- Illness.
- Moving onto a different project.
3. Organize All Your Contracts and License Agreements
You’ll want to collate the following when selling your company:
- Operating license agreements (for software, for example.)
- Company bylaws that relate to the sale.
- Dissolution of corporation status.
- Multiple owner sign-off.
4. Ensure You Have All Relevant Documents
You’ll need both business and tax documents when selling. Business documents include things like your marketing plan, supplier and customer contracts, product pricing lists, and a written business plan.
Tax documents include all your federal and state returns for the last three years, along with profit and loss statements. These are the most important documents needed to sell a business.
You may also require:
- Intellectual property documents
- Financial statements with creditors and accounts receivable
- Legal documents, such as stocks and shares held by the company, employment contracts, pending lawsuits, and so on
- Business assets and associated paperwork
- Insurance coverage and policies.
5. Write a Company Inventory
A company inventory lets both you and the buyer know in detail what comes with the business. Examples of items on this list might include buildings, equipment, vehicles, and staff roles.
6. Discuss Supplier Contracts
Buyers will want to know who your suppliers are. Small businesses for sale, therefore, should have a list ready. For instance, make a list of all the services you regularly use that are not a part of your business, such as cleaners or SEO agencies.
7. Prepare for an Environmental Audit
Any due diligence checklist for selling a business should include provision for an environmental audit of your firm. Only licensed environmental auditors can perform these. They will explore:
- Your business permits and whether they are up to date.
- Whether your company meets environmental standards.
- What measures you will need to take to bring your firm up to scratch if it is not already.
8. Provide Buyers With a List of All the Licenses and Permits Required To Run the Firm
For someone buying a business, the checklist of needed permits and licenses could include:
- Land use permits.
- Tax registration.
- Business sector licenses.
- Environmental permits.
- Liquor licenses.
- Business handover permits.
These licenses may not automatically pass over to them when they purchase the business, so you need to be prepared for extra legwork.
9. Tell Your Employees
Once you’ve put the groundwork in place, you’ll need to tell your employees what’s happening. Inform them whether they will keep their jobs, what corporate policies might change, and who the new owners are.
Always treat employees well and engage with them in concert with the buyer. They are a valuable asset to the firm, and you don’t want extra trouble in the form of lawsuits from disgruntled workers.
10. Identify Outstanding or Unfinished Work
Tell the buyer which projects or contracts are ongoing and yet to be fulfilled. Check domain renewal dates for your business website.
11. Prepare Succession and Confidentiality Agreements
Use your attorney to draft a succession agreement that will formally transfer your business to the new owner.
Also, get them to prepare a confidentiality agreement. This protects you from buyers who might misuse financial information regarding your company. It also prevents any sensitive information from becoming public.
12. Prepare and Sign the Sale Documents
The final part of the process is to prepare and sign the sale documents. You’ll need:
- An indication of interest, which is a document signed by both parties before buyers learn more about business assets or get copies of other documents, such as tax returns.
- A letter of intent, which is a sign of a pending purchase.
- A purchase agreement, to be signed by both you and the new owner once you finish the negotiations.
Once you’ve signed all these documents and followed the proper legal process, the business sale is complete.
Further Reading
Conclusion
In this article we ran through all the things you need to do to sell a business successfully. Usually, the buyer will pay the closing costs, so you don’t need to worry about these. Just remember to go through each of the factors we’ve mentioned carefully as forgetting any of them could compromise the sale of your business.