Documentation Required For A Smooth Business Sale
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I get a lot of what I call “too late” calls.
“John, someone just walked into my business and offered me a million dollars for it. Is that a good offer? And they want all this information. I just don’t have it. What do I do?”
It’s too late because they should have been thinking about this years ago. Ideally from the day they started the business.
Good documentation makes a sale smoother, faster and less painful. It can also INCREASE the value of your business.
The 10 areas buyers will ask about
Not an exhaustive list. But it covers the main ones for most businesses. How many can you tick off today?
Financial records
Three years of accountant-finalised accounts, plus a year-to-date P&L reconciled to last month end. Tax returns come later, at due diligence.
Marketing materials
How do customers find you? Website, social media, advertising, and your sales processes, documented so a buyer doesn’t have to start from scratch.
Customer list
The gold is in the list. Keep it in a CRM, not just your accounting package, with what each customer buys, how long they’ve been with you and what recurs.
Inventory
Quantities, values, purchase dates and locations, so a buyer can see how fast stock turns over.
Employee information
Roles, duties, length of service, accrued entitlements, policies, and any contractor or remote-worker agreements.
Contracts
Suppliers, customers, equipment leases, NDAs, and especially your premises lease: term remaining, options and rent reviews.
Intellectual property
Trademarks, patents, copyrights and registrations. Often overlooked, and sometimes worth more than the profit.
Physical assets
Equipment, vehicles and property included in the sale: description, age, value, location and purchase price.
Legal documents
Partnership and shareholder agreements, company documents. Obvious? Sure. But are they current and easy to find?
Everything else
Insurance policies, warranties and service level agreements. If it matters to how the business runs, have it ready.
Why IP and customer lists can beat profit
Most small businesses are valued on profit. But a strategic buyer will sometimes pay MORE for your customer base or your intellectual property.
Microsoft paid billions for LinkedIn for its user base, not its profit. Unilever paid around a billion dollars for Dollar Shave Club to get a direct-to-customer channel it didn’t have.
Your business isn’t LinkedIn. But the principle is the same. Document what makes you valuable, so a buyer can see it.
Quick questions
Do I need all this if I’m not selling?
Yes. Good, organised documentation makes good business sense whether you sell or not. It’s also what lets the business run without you.
Does it matter how the business is sold?
It does. Most small businesses, under about $5 million, sell their assets: goodwill, plant and equipment, and stock. Larger ones often sell shares in the entity. The structure changes what a buyer needs to see.
How do buyers check I actually own the assets?
In Australia they can search the Personal Property Securities Register to see if anyone holds security over them. Make sure your records match.
Prefer to read it? Work through the documentation checklist on the blog →
Get your paperwork ready before someone asks.
My free Sale-Ready Scorecard shows where your business stands in under 5 minutes. Want to know exactly what a buyer would ask for? That’s what the Sale-Ready Assessment uncovers.
Want to learn it step by step? Try a free mini course
YOU NEED TO KNOW YOUR NUMBERS.
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