You might think you are ready to sell your business, but few small business owners actually are. Do you have all of your books in order, have you made any necessary repairs or paid off all of your business debts?
Preparing a business for sale is a lot like preparing a house for sale. You need to make it look aesthetically pleasing and fix what’s broken.
There is, however, one major difference. Due diligence.
Once you have accepted an offer from a buyer, the due diligence period begins and you will be opening up your financial records, contracts, leases – everything – for that buyer to inspect.
Any problems found during due diligence can lead to one of two outcomes. Either the deal is dead and the buyer walks away, or they come back to you with a lower offer to compensate for the problems they’ve found.
No seller wants a perfectly good deal to fall through, and you want to get the best possible price for the business you’ve worked so hard to build – so how do you avoid due diligence issues?
Do due diligence on yourself.
Before a buyer has a chance to peek behind the scenes and go over your books with a fine-tooth comb, you should do this yourself. By performing due diligence on yourself you will see your business through a buyer’s eyes and will be able to address any potential problems long before a buyer finds them.
Don’t think you have any issues that will come up in due diligence? Think again. All small businesses have a few skeletons in the closet, and they can’t be hidden. Buyers always find issues, so the best way to deal with this eventuality is to solve the problems before they are found.
How do you do due diligence on yourself? Ask your business broker for guidance and perhaps employ the services of a business transaction CPA. Some questions you could address?
What documentation do you need to be going through?
Do you know where all of your documentation is?
What financial information will buyers be interested in?
What are your possible due diligence issues and how can they be addressed before a buyer finds them?
Performing the due diligence process on yourself will help you and your business to stay ahead of the game during the transaction process and will also help you get the biggest return on your business sale.
Do you have questions about what buyers will want to see during due diligence? Would you like to know what problems we’ve seen in due diligence in the past? Ask us! Leave any questions or comments and we would be happy to help.
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