Documentation Required For A Smooth Business Sale

documents for a business sale

When it comes to a business sale, having good documentation is crucial.


Detailed and well-organized records not only make the business sale process smoother, but they can also increase the value of the business.


Here I'll explain how to document a business ‘ready for sale’ and the types of information buyers will be looking for. For your specific business consider participating in my online, done with you program during which you will learn how to value your business, make it attract buyers and understand the sale process. I'll work with you on your business so that you get positive outcomes specific to you.

This article is 'general' and the exact documentation for your business will vary. Please note that you will not need all this documentation on day 1 of your sale journey, and in fact there are some things that you would not disclose until well into the sale. That's why you need to understand the whole sale process and plan and prepare early.

1. Financial records: Financial documentation is one of the most important aspects of a business sale. Buyers will want to see evidence of the company's financial health, including profit and loss statements and balance sheets. If it gets to due diligence (and don't do it before) - tax returns as well. It's a good idea to have at least three years' worth of financial records available and the accountant’s finalised accounts. You will also need year-to-date profit and loss reconciled to the last month’s end.

2. Lease and premises details - this is very business dependent. If the success of the business is location-dependent then obviously the buyer will want a good lease term going forward. Other buyers may want the business to be relocatable so having all the details available for discussion is important. If the business owner also owns the premises, then it raises more questions. For example, is there market value rent in the financials and will it be the same rent for the new owner? Are there clauses around redevelopment, fit-out upgrades and so on? It can get quite involved especially if the landlord is overseas somewhere.

3. Marketing materials: Potential buyers will want to know about your marketing efforts and how you attract and retain customers. This could include information about your website, marketing systems, social media presence, and any advertising or promotional materials you use. In other words show your marketing and sales processes and systems.

4. Customer list: (You would not disclose customer details until a contract has been signed. Contact me to discuss how to handle this request from the buyer). A list of your current customers, including the products or services they’ve purchased, how long they have been a client and any recurring revenue. This is a very valuable asset for a buyer. A good CRM (Customer Relationship Management) tool will be able to collect and report this information. This will give potential buyers an idea of the types of customers you have and the potential for ongoing income and growth.

5. Inventory: If you have a physical store or sell products, it's important to provide an accurate inventory list. This should include the quantity, value, when purchased, cost into store and location of each item. Only 'saleable' stock should be included. For some businesses, it would include inventory for work in progress.

6. Employee information: Buyers will want to know about your current employees, including their job titles, duties, and length of service, entitlements etc. You should also have information on any employee benefits or policies that are in place. Are there any non-compete restrictions in place for employees or contractors? If you are using contractors or remote workers in the business what are the agreements with them? Are there employees eligible for long service leave and other sizeable payouts?

Note: If you sell the business as an asset sale as most small businesses (under $5 million) are sold, then employees will be terminated and re-employed into the buyer's entity. If it is a share sale then the employees remain employed. As a business owner, you need to understand the different ways of selling and the implications.

7. Contracts: Any contracts you have with suppliers, vendors, or customers should be included in the documentation. This could include contracts for products or services, lease agreements on plant and equipment, or non-disclosure agreements. If there is a lease on the premises then this needs to be available and current. (See 2. above)

8. Intellectual property: If your business owns any patents, trademarks, or copyrights, you'll want to provide documentation for these as well. This could include any registration documents or legal agreements.

9. Physical assets: A list of the physical assets of the business, such as plant and equipment, vehicles, furniture, fixtures and fittings and anything that's being sold with the business should be included in the documentation. This list should include a description, value, and location of each asset which is being included in the sale.

10. Legal documents: Any legal documents related to the business should be included in the documentation. This could include articles of incorporation, operating agreements, partnership agreements and shareholder agreements.

11. Miscellaneous documents: There may be other documents that are relevant to the business sale, such as insurance policies, warranties, or service agreements. It's a good idea to include these in the documentation as well.

Is the business you are selling a FRANCHISE? Are you a franchisee or the franchisor? For franchises, there are additional documents that you need to have up to date and available. If you are in this category then contact me for a chat.

This is not a definitive list and the exact documentation for your business could be different. I cover this in my online program. In any case, how saleable is your business and could you increase its value? Take my quick (less than 4 minutes) business saleability quiz.

In conclusion, thorough and organized documentation is an essential part of the process of selling a business. By providing detailed and up-to-date documents and any other relevant information, you can increase the value of your business and make the selling process smoother and more efficient.

Posted in

John Denton

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top