I’m ready to sell my business, what records will I need to provide to my business broker and to potential buyers?
Think of the records needed for a business transaction this way. You would like a potential buyer to pay top dollar for your business, and the quality and completeness of your records will be what makes this happen. You will have to be able to prove to the buyer that the numbers you are claiming are the real numbers.
You don’t have to be ready to sell tomorrow to begin getting your financial record ducks in a row. The sooner you start getting your numbers together, the better. Do your best to keep meticulous records. The better your records, the better a buyer will feel about paying the price you are asking for. Keep accurate financial records and statements, receipts from a cash register, and any records that can help you to prove your income and expenses. Current and past tax returns will also be needed, so be sure you are caught up with your taxes.
When you begin working with your business broker, they will want to see your numbers in order to assist you in creating an accurate evaluation of the business, and therefore a realistic asking price. Your listing price will be based on a number of factors, but a big part will be provable cash flow – because that is what buyers are after.
Is it impossible to sell my business if my records are a mess?
No, it will just take a little more work to get the records in order. You will not be the first (or the last) client with less than adequate business records that your business broker has come across. Give what you have to your broker, and by working together you can get the records in shape. You may also need the services of a business transaction accountant, so ask your broker if they think you will need additional help.
What if I have taken cash out of my business without recording it? How do I prove that income?
It can be difficult to prove unreported income, so the best advice is to start reporting all income right now. Including all of your income is crucial if you want to get the best price for your business, although some businesses do sell even without all income reported.
The message here is an ounce of preparation will make getting your business on the market much easier – but all is not lost if your record keeping has been sub-par.
Are you thinking about selling your business but are worried about the state of your records (or lack of records at all)? Do you have more questions about what business buyers will want to see? Leave any questions or comments and we would be happy to help.
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