Planning and Preparation for a Business Sale, Page 2

Knowing Your Company

Once you have decided to sell your business, you, your business broker or other representative will assemble an Offering Memorandum, which will contain comprehensive information about your company. Since knowledge can help eliminate risk, the more information you are able to provide on your company, the higher the chances for a successful sale.

• Track your sales in detail: By product and service, by method (repeat sales, through advertisements, specials, etc.)
• Know your market: Keep copies of articles about your industry, your competitors, and customers.
• Understand your operation: Be ready to explain changes in sales, cost of goods, etc., as well as unusual one-time expense items.
• Keep track of all your compensation: Be able to itemize your salary, benefits, profit sharing, and other perks you take out of your company.

Documentation

In preparing to sell a business, or for that matter preparing to value a business, you must first gather documentation. Your business broker or other professional will use this information to help establish a value that purchasers in today's market would be willing to pay.

Although you will provide this information to those assisting you in the sale process, it is important to realize that certain confidential records, contracts and statements will not usually be disclosed to a purchaser until an acceptable offer or letter of intent has been signed by both parties.

Information needed includes:

• Income Statements and Balance Sheets for the past three years
• Current YTD Income Statement
• 3 years Tax Returns
• Records of Accounts Receivable And Payable
• Copies of any notes or mortgages owed
• Copies of any facilities and equipment leases
• Existing contracts with employees, customers, or suppliers
• Any patents, trademarks, or copyrights

Once you have gathered this information, you are ready to begin the process of selling your business.