Connecting retiring owners with buyers wanting to grow an established business

Selling a Business

Seller’s Checklist


When you have a ready buyer, time is of the essence. This checklist helps you prepare for any hurdles when transferring the business.

The process of selling involves: 1) Prep, 2) Estimate of Value for asking price, 3) Ideal buyer profile creation, 4) Marketing materials & story development, 5) Field and quality buyers, 6) Structure a deal 7) Closing documents 8) Transition

1-Have your documentation ready for buyer’s due diligence
Even if you haven’t supplied all of the following to your broker when marketing your business, the Buyer, during Due Diligence, may ask you for any of the following documents. If you are ready with them, it makes the buyer more confident in you and your business: 

  • P&Ls (3 years) 

  • Tax Returns (3 years)

  • Asset List (with value, if known) 

  • Balance Sheet (current)

  • Current Inventory

  • Cash flow by month (1-3 years)

  • Employee List & Responsibilities (remove employee contact info)  

  • Key contracts with customers &  suppliers (redact contact info)  

  • Maintenance Records

If you do not have requested records, offer a replacement document that conveys similar types of information rather than denying it outright. 

2-Communicate earnings in all forms: wages, cash sales, and draws

One of the most difficult areas to assess in the business is “how much is the owner (you) taking home?”  Be as clear as you possibly can with the Buyer about this.  It matters.  Explain any cash revenues you are taking in (neither the buyer nor your broker is the IRS!) and spend time ensuring the Buyer fully understands this.  If you don’t know, it is worth going to your bank account and researching it for the past 3 years.

 3-Begin to empty your outdated and obsolete inventory

The value of your saleable inventory is assessed shortly before closing and is typically added to the price of the business. The buyer will likely only want current inventory that can be resold so clear out as much of your obsolete inventory as you can.

4-Collect, collect, collect

Even if you sell your accounts receivable to the owner, you will not likely get 100% of the value, so collect as much of your outstanding invoices as possible while still leaving 1-2 months of AR for the Buyer as negotiated.

5-Decide on your transition plan with the buyer after the sale

 Typical is 2 weeks of day-to-day operations for simpler businesses; 1-3 months for complex businesses.  There are two additional options:  You may wish to offer a short initial time for training (say 5 days), then offer a “batch” meeting once a week to clear out remaining questions and compress that into a shorter time commitment for you.  The buyer will keep a list of questions for you and ask them all at once.  Alternatively, you can be a contractor for the buyer on a paid engagement after the sale for as long as you wish.   

6-Employee notification

Buyers often request access to your employees prior to closing.  This is understandable, but it is risky for you if the sale falls through just prior to closing.  Know up front when and how you wish to notify employees. A best practice is to wait until the day after closing when Buyer/Seller notify the employees in person and they see that you are committed to a smooth transition with minimal disruption.  The Buyer will issue new Employee Contracts and your contracts will be terminated.  Assure employees that this does not mean they are fired!

7-Help your buyer expedite financing

If the Buyer is seeking bank loans (especially SBA), the documentation requests are usually arduous and time-consuming. The bank looks for information about the Buyer as well as the Business. Be patient with the requests from the bank. The loan process can take up to 3 months.

Sellers may consider offering a 3-4 month Seller’s Note to cover the short span of time once the bank issues a pre-approval letter so that you can close.  If your buyer defaults, or the loan is disapproved, you get the business back but this might be similar to being on the market for another 3 months. Remember: 

  • You define the terms as you are the lender.  This can include term, percentage, fees, penalties, etc. 

  • You can earn interest of 10-15% during that period.  If you carry the note for more than a year, typical interest you can charge might be 6-8%. 

8-Prepare to transfer services arrangements such as:

  • Trash Removal

  • Security Service

  • Burglar Alarm Service

  • Janitorial Service

  • Equipment Maintenance Contracts

  • Inventory Service

Buyers generally get their own: liability insurance, employment contracts with the employees, POS (point-of-sale systems), bank accounts, specialized credentials that follow an individual not a business, if any are needed.

Top Reasons Buyers Rescind
their Offer during Due Diligence: 

1.     Financials are not in order. Something seems “fishy” -- the numbers don’t add up between the taxes returns, P&Ls, or sales receipts. Be forthright from the start. Problems will be uncovered eventually either way. 

2.    Financing falls through.  Supply documentation to the bank and consider a 3-month note to cover the bank’s financial review period. 

3.    Seller is hesitant to supply information or withholds records requested by Buyer.

4.    Personality conflict between Seller and Buyer.  Loss of trust, inflexibility, disengagement.

5.    Seller does not continue operating the business in its “normal” state prior to closing.  (e.g. depletes inventory, lets go employees, reduces hours, stops ordering supplies). 

6.    Buyer has a disagreement with the landlord before lease transfer.

7.    Cold feet/ sudden life change. Buyer’s earnest money is forfeited, but you still end up with your business!