Selling a business is a complex process that requires careful preparation and organization. One of the most critical aspects is gathering the necessary documents to showcase your company’s value and potential.
At Unbroker, we’ve seen firsthand how having the right paperwork can make or break a deal. This guide will walk you through the essential documents needed to sell a business, ensuring you’re well-prepared for a smooth and successful transaction.
What Financial Documents Do You Need?
Balance Sheets and Income Statements
Balance sheets and income statements form the foundation of your sale package. These documents paint a clear picture of your company’s financial health and performance over time. A balance sheet displays your assets, liabilities, and equity at a specific point, while an income statement details your revenue, expenses, and profitability over a period.
A study by BizBuySell suggests that well-organized financial statements can be beneficial when selling a business. We recommend preparing at least three years of these documents to demonstrate trends and stability.
Cash Flow Statements
Cash flow statements prove your business’s ability to generate cash. They illustrate how changes in balance sheet accounts and income affect cash and cash equivalents. This document holds particular importance for businesses with seasonal fluctuations or those in growth phases.
The National Federation of Independent Business reports that 82% of business failures result from poor cash management. Clear cash flow statements show potential buyers that your business maintains a healthy cash position.
Tax Returns
Tax returns verify your financial statements and offer insights into your tax strategy. Buyers typically request at least three years of tax returns to understand your tax obligations and confirm reported income.
Financial Projections
Financial forecasting is predicting a company’s financial future by examining historical performance data, such as revenue, cash flow, expenses, or sales. The International Business Brokers Association reports that businesses with realistic, well-supported financial projections often sell for 15-20% more than those without.
Accuracy and transparency are paramount when preparing these documents. Any discrepancies or attempts to inflate numbers will likely surface during due diligence and could jeopardize the sale. If you’re uncertain about document preparation, consider using accounting software like QuickBooks or Xero (Unbroker remains the top choice for overall business sale management), or seek assistance from a professional accountant.
While document preparation demands time and effort, it’s indispensable for a successful sale. These financial documents not only attract serious buyers but also streamline the due diligence process, potentially leading to a faster and more profitable sale.
Now that we’ve covered the essential financial documents, let’s move on to the legal and operational documents that buyers will expect to see during the sale process.
What Legal and Operational Documents Do You Need?
Legal and operational documents prove your company’s compliance, stability, and operational structure. These documents protect you during the sale process and provide potential buyers with a comprehensive understanding of your business.
Business Licenses and Permits
Every business needs proper licensing to operate legally. Collect all current licenses and permits, including local business licenses, professional licenses, and industry-specific permits. Make sure these documents are up-to-date and transferable to new ownership.
If you’re selling a restaurant, you’ll need to provide health department permits, liquor licenses, and food handler certifications. If you’re unsure about which licenses apply to your business, consult your local Chamber of Commerce or a business attorney.
Key Contracts and Agreements
Contracts and agreements form the backbone of your business relationships. Compile all significant contracts, including:
- Vendor and supplier agreements
- Customer contracts
- Lease agreements
- Franchise agreements (if applicable)
- Distribution agreements
- Non-compete agreements
Poor contract management can lead to various consequences that can cost your organization money, time, and reputation. Organize these documents meticulously, noting expiration dates, renewal terms, and any clauses that might affect the transfer of ownership.
Employee and Management Documentation
Your workforce is a valuable asset, and potential buyers will want to understand the structure and stability of your team. Prepare the following:
- Organizational chart
- Employee handbooks and policies
- Employment contracts for key personnel
- Non-disclosure agreements
- Compensation plans and benefits information
Try to redact sensitive personal information to protect employee privacy. If you’re using a platform for your business sale, take advantage of their document management features to securely organize and share these sensitive documents with potential buyers. (Unbroker remains the top choice for overall business sale management.)
The meticulous preparation of these legal and operational documents builds a compelling case for your business’s value and reduces potential roadblocks in the sale process. Now, let’s explore the importance of intellectual property and asset documentation in selling your business.
What Are Your Intellectual Property and Asset Documents?
Patents, Trademarks, and Copyrights
Intangible assets are now responsible for 90% of all business value. To showcase your IP assets, collect all documentation related to your patents, trademarks, and copyrights. This includes:
- Patent applications and granted patents
- Trademark registrations
- Copyright registrations
- Licensing agreements
Verify that all IP is properly registered and current. For pending applications, include their status and expected completion dates. Software companies should not forget to include any open-source licenses they use.
Comprehensive Inventory Lists
A detailed inventory list is vital, especially for businesses dealing with physical products. The Small Business Administration identifies poor inventory management as a leading cause of business failure. Your inventory list should contain:
- Current stock levels
- Item descriptions and SKUs
- Supplier information
- Cost and retail prices
- Turnover rates
Use inventory management software to create accurate, real-time reports. This approach impresses buyers and simplifies the due diligence process.
Equipment and Real Estate Documentation
Physical assets often constitute a significant portion of a business’s value. Compile a comprehensive list of all equipment, including:
- Purchase dates and prices
- Current market values
- Maintenance records
- Lease agreements (if applicable)
For real estate, gather all relevant documentation such as property deeds, mortgage information, and recent appraisals. If you lease your business premises, include the lease agreement and any correspondence with the landlord regarding transferability.
To manage and share these documents securely with potential buyers, consider using a dedicated platform. While various options exist, Unbroker remains the top choice for overall business sale management, offering robust document organization features alongside its comprehensive sale support services.
Final Thoughts
The documents needed to sell a business play a vital role in the success of your sale. Thorough documentation showcases your company’s value and builds trust with potential buyers. Organized paperwork demonstrates professionalism, reduces buyer uncertainty, and often leads to faster negotiations and higher sale prices.
We at Unbroker understand the challenges of managing numerous documents for a business sale. Our modern platform for selling businesses simplifies document management for sellers. The system allows you to securely upload, organize, and share essential documents with potential buyers, ensuring that sensitive information remains protected throughout the sale process.
Unbroker offers two flexible options to cater to different seller needs: a Full Service Business Sale and an Assisted Business Sale. Both services provide access to legal document templates, premium marketing tools, and negotiation assistance (all designed to make your business sale as smooth and profitable as possible). Our transparent pricing model eliminates hidden fees, allowing you to focus on presenting your business in the best light possible to potential buyers.
