This article was originally posted on 28th of August 2020 and has been completely revamped and updated to keep it up-to-date.
Once you’ve decided it’s time to leave your business, the next step is getting your documents ready for sale. But, is there an easy way to navigate this process?
It can be difficult to say goodbye when you’ve spent years growing and nurturing a company: you may have a lot of questions regarding selling your business. However, one of the best gifts you can give your employees and the buyer is an organised set of documents. This will prepare your company for more growth, increasing the sale price or business valuation.
Knowing what documents to include on your checklist is crucial and helps avoid the likelihood of the deal falling through.
In this article, we provide a practical checklist for selling a business. The content of this list is needed for buyers as it will give them a clear understanding of your business and it’s accounts. Plus, it protects you post-sale. There are some particular documents all business sales need. By using a universal checklist for this popular business exit strategy, you will be better prepared than most.
At Uscita, we’ve helped countless professionals to reach their ideal exit outcome. Though each business exit is different, they all have one thing in common – an exit checklist.
We’ve created a downloadable checklist curated to the needs of all business owners. This document offers a clear explanation of the documentation process, plus detailed information about:
- Business finance documentation
- Company legal information
- Business asset information
- Business details information
- Employee information
- Business premises information
- Business website and software information
This article will give you a brief overview of the checklist, so if you’re new to this topic read on. When you’re ready to explore these topics in more detail, download our free checklist for a complete guide to business documentation. Our checklist is curated to meet the needs of all business owners using the experience we’ve gathered over time in the industry.
How to keep confidentiality when preparing a checklist for selling your business?
You may be worried about sharing documents with potential buyers. This is a fair doubt and one we hear a lot when preparing businesses for sale.
While your internal information gathering should be complete and intact, you may not share all of it straight away.
Buyers need some documentation before they are able to make you an offer to purchase. At that point you will want to anonymise various customer, supplier, staff and other details which are either subject to GDPR regulations or business critical to your success.
It is only later on when you will need to share specific details – a broker can help navigate the process and the confidentiality queries involved.
Keep on reading to find out the most important aspects of a business checklist.
Why do I need a checklist for selling my business?
Before we jump into the complete checklist for selling a business, it’s important to discuss why this element is essential. Checklists are an age-old way to keep your affairs in order. Lists work when grocery shopping or packing for a vacation. They’re also crucial when selling a business, and ensuring a high success rate of the deal smoothly going through.
When you’ve decided it’s time to sell, make sure you take a moment and think about what the buyer will be looking for. At this point, most business owners have spent so long mulling over their ideas, they often forget to consider what a potential buyer wants. Sure, selling your accounts is essential, but you need to be offering more than that. It’s also crucial to complete the due diligence process thoroughly, as organised documentation will leave you with a better business valuation and a higher sale.
A well-organised checklist should give prospective buyers a clear and thorough view of your business. Listing the details of your company in one place might even feel vulnerable to some, but this transparency is essential. A buyer is more likely to agree to a sale if you’re upfront about the positives and negatives of the company. This shows them how the company is run and helps them reduce risk when buying.
A checklist will also help you navigate the sale process. Thorough planning will always put you in good stead, so make sure you are on top of your affairs. Selling a business without a solid plan can sometimes delay completion. This is because you’ll need to spend extra time finding lost or forgotten information.
Plan well ahead or use a trusted checklist to avoid any bumps in the road when mapping out a business exit.
What do I need to sell my business effectively?
If you’re ready to sell your company, there are specific steps you can take to confirm a successful exit. The most important aspects are the exit timelines and the preparation of documents.
1. Plan & strategy
An important consideration when exiting a business is the plan for leaving – or an exit strategy. A clear roadmap for the months ahead will not only give you a clear direction but will leave the business in a position to grow and thrive after your exit. This also looks more attractive to potential buyers. When deciding on a suitable strategy for your business, you’ll need to know the market value of your business. If you don’t know this figure now, a business valuation from a business broker, like Uscita, will help you. You should then focus on the timescale of selling your business. How soon do you need to break away from the company? After you’ve figured out your time plan, it’s time to decide if you want any involvement post-sale and if you want to improve the value of the business pre-sale. Business exit plans look different for different owners. Some reasons for a business plan include:
- Reducing your control and stake in the business.
- To cash out of any investments. This route is common with venture capitalists.
- To make a profit.
- To limit losses if the business is unsuccessful.
2. Documents When you’re selling a business, documents are one of the most critical pieces of the sale. While you should spend time curating a business exit strategy, it’s also essential to prepare your records and documents. Correct documents and financial records show potential buyers that you have nothing to hide. This creates trust in the sale and gives buyers the confidence to take over your business. If all documentation is present your company will look stronger – transparency is key. Proper documentation will also boost the independence of your business. If your team can understand the inner workings of the company without you there, it will flow well once the sale is completed. This allows you to relax and enjoy your retirement. If you have time before you implement your exit strategy, start to compile your documents slowly. Make sure everything is ready for due diligence and ensure your financial transactions are accurate. This process can take a substantial amount of time, so it’s best to start early. This practical side of the deal often gets left until the last moment, but you can’t ignore it. Organised documents are needed for a satisfying exit!
How to plan for the sale of my business?
Whether you’re considering a business exit or maybe you’re ready to start the process, there are lots of paths you can take for a successful sale. When you’ve spent decades building a successful business, it’s vital that you keep this momentum going until the end and choose when to exit your business correctly. Continue your legacy at the company with an exit that allows the business to grow. A plan will leave you and your employees with a step-by-step guide for your exit. This roadmap looks different for different businesses, but many companies can use the same frameworks. Uscita have been working with business owners for years and are always ready to help you with a business exit strategy if needed.
Which documents will I need to pass due diligence?
Once you’re ready to start your exit plan, compile any necessary documents. Ensure you prioritise any that will need to pass due diligence. Having these documents ready to go from the start of the process will save you time further down the road and will make your business more sellable. Not only that, but it will lead to less stress and higher personal satisfaction when the exit strategy begins. Of course, you won’t have to share all of this information with the buyer from the get-go. Your solicitor will share some documents when finalising the sale. But, it’s still good practice to have the majority of records at your disposal throughout the process. Here are some of the most critical elements to have prepared when selling. If you want to find out more, view the extended list in our free checklist. This checklist expands on these points to make sure you don’t miss a step when compiling your business information. Ready to see the full picture? Download the free checklist document here. The Uscita team curated this complimentary document from their years of experience working with business owners.
Business Finance Documentation
This is the starting point for the majority of business sales. Prospective buyers will want to see financial information and any potential revenue forecasts. This gives them a quick insight into the past and future of your business. Make sure you include:
- A minimum of 3 years of full trading accounts.
- Current management accounts.
- Details of taxes paid and proof of payment.
Want to know more about business finance documentation? Download the free document in the link above.
Company Legal Information
A business sale involves the transfer of legal ownership. Potential buyers will need to see any company legal information before a sale. Make sure you include:
- A list of all Shareholders and Directors.
- Your company registration document (or partnership agreement).
- Documents that detail trademarks, patents, and copyright information.
Business owners can explore company legal information in more-depth in our free checklist. Find it using the link above.
Business Asset Information
Business assets will look different for different industries. For some companies, e.g. when selling an engineering business, they might be machinery, and for others, these might take the form of online documents. Here are some common assets:
- A schedule of assets, including current values, purchase values, and depreciation terms.
- Maintenance and service records for applicable assets e.g. for machinery and production equipment of a manufacturing company
- Company vehicles with service information, MOT dates, lease details, and latest mileage.
If you need extra guidance on business asset information, explore our free checklist in the above section.
Business Details Information
Business details often include the work you do for customers or how you create the products that you sell. Make sure you include:
- An up-to-date service or product price list.
- A current business plan that offers insights or forecasts into the company’s future.
- The business’s procedures manual with details of all major processes.
Extra information about business details can be viewed in our free business checklist, linked above.
Another critical area prospective buyers will want to see is your employee information. This information should include data concerning current employees and previous staff. The previous staff information informs the buyer who might still retain a right to claim against the company. Make sure you include:
- Any employment procedures, including recruitment policies and an HR manual.
- An organisation chart for the business.
- A list of existing employees.
Compiling employee information can be confusing, make sure you stay on track with our free checklist linked above.
Business Premises Information
You must also offer information concerning the premises your business uses. This might also contain information about legal documents underpinning the premises. Make sure you include:
- A copy of your current lease, with any sublease details and annual service charge costs.
- If the premises are freehold, a copy of the land registry records or the party that holds the deeds.
- Copies of current business rates schedules and if there are any applicable rebates.
If you want to find extra guidance on business premises documentation, review our free checklist.
Business Website and Software Information
Your website and software information is more important than ever today. Compile this information to allow your prospective buyers a clear view of your company’s digital footprint. Make sure you include:
- A list of software packages used by the business. This will consist of licence information and any access codes.
- A complete list of account names and passwords for all users (including former employees if still active).
- Any company website information. This might include who host the website or the control panel passwords.
When selling your business, there are many different components to consider. A pre-made checklist can be beneficial when you’re starting to organise your sale. If you’re interested in a tried and trusted business selling checklist, download the free Uscita checklist.
When is the best time to compile business documentation?
Everyone’s business exit strategy will look different. While some owners have the luxury of time, others have to compile their information closer to the sale deadline. It’s advised to start collecting data as early as possible. This is key to creating a comprehensive strategy. If you don’t have the luxury of time, you can still make a successful exit closer to the exit date. Many business owners ask why they can’t compile all of the information when the sale happens. This is an option, but it can come with higher stress levels. If your documents are updated and filed, they look more attractive to a buyer too. Keeping this company information in an easily accessible format will help on several levels;
- You should be keeping employee lists, asset lists, customer and supplier contracts updated. Why spend time compiling a big list when you can keep the data updated as you go? If you use something to drive your business forward, keep it in a format that will support your business sale.
- For company registrations, trademarks, minutes of meetings etc., it is more a case of keeping a great filing system. Be that paper or electronic, ensure the information can be retrieved when needed.
- For software items, regular reviews on access and authorisation are necessary for security. It will also demonstrate your seriousness as a business to protect yourself.
If you’re looking to exit as soon as possible, a checklist is more important than ever. Since the procedure sometimes moves quicker in a last-minute sale, a pre-made list will help organise your documents. This also prevents you from forgetting anything. Selling a business is stressful, but make sure you take your time and go through the process slowly. Never forget to look at the sale from a buyers perspective. A complete checklist will ensure you meet their needs. If you want to explore what a business exit is like, find the buyers perspective here.
Is your exit checklist ready?
When you’re ready to take steps towards a sale, it’s always best to take your time. Here at Uscita, we always advise business owners to consider making or using a thorough list. We understand that each sale looks different, so if you’re feeling extra pressure, we’re here to help. Remember that it’s normal to feel stressed during the lead up to an exit. You’ve spent years, or even decades, building a business to help clients. Wanting the final exit to be stable is normal. Ensure you stay focused throughout the sale with Uscita’s support, or download our free checklist. This complete guide features unseen information about documents you should be compiling and why. We want to help you leave your business with a satisfying exit. From business valuation services to comprehensive planning, our team is here for you. When you work with us, you receive guidance from professionals specialising in exit plans. Uscita works with companies in the B2B professional services, engineering, and manufacturing industries. Make sure your exit is satisfying today with our help. Find the free Checklist for Selling Your Business ebook here, or explore our free valuation services.