Buyers have specific requirements when purchasing a small business. You need a good sales pitch to find the right buyer. You also have to ensure that your business and legal documents are complete. Getting all these ready helps build trust and speeds up the sales process. Small business buyers typically look for five important documents.
Business Licenses
Any serious buyer will be looking into the legalities of your business. They need to ensure that there are no legal problems that are yet to be settled. Keeping these documents up to date and organized shows that you are a professional. This helps avoid legal issues. Prepare the following for a seamless selling process:
- Employer Identification Number (EIN)
- General business license
- Sales tax permit
- Reseller’s certificate
- Local Zoning and land use documents
- Industry-specific Certifications
- Health safety compliance permits (if required)
Financial Documents
These are documents that every business buyer will be looking for. They help buyers look at how your business is performing. This also allows them to identify opportunities and risks. The financial statement often includes the following:
- Accounts receivable reports.
- Balance sheets for at least 3 to 5 years.
- Cash flow statements.
- Inventory valuation.
- Loan and debt records
- Profit and loss statements.
- Recent income records.
- Tax returns.
Personnel or Contractor Files
Buyers will want to see documents about your staff or contractors. It is crucial to show that your team is organized. This will help buyers assess the workforce that they will they will take on. They would also want to know about the ongoing expenses related to employment. Some buyers prefer that existing employees remain after the sale. This ensures a seamless transition and ongoing business processes. These documents might include the following:
- Employee and contractor agreements
- Job descriptions
- Payroll records
- Benefit plans
Standard Operating Procedures (SOPs)
Buyers want to see proof that a business is independent from its owner. That this can keep operating well after the takeover. Operational documents help buyers understand how the business operates on a daily basis to sell a small business. These are very important if the buyer does not have much experience in your industry. A well-documented business assures them that they can take over easily. This ensures that they can keep things running smoothly without major interruptions.
Tax Returns
This verifies that the financial information is accurate and matches what has been reported to the government. Buyers typically want to look at business tax returns from the last three years to check for accuracy and consistency. Differences between tax filings and internal financial records can cause concerns and disrupt the deal. Filing complete and accurate tax returns helps build trust and makes the due diligence process easier.
Conclusion
Getting these important documents ready ahead of time can boost your chances of selling your business fast and for a fair price. Buyers want to ensure clear and accurate information from these documents. This helps you gain their trust and shows that your business is ready for new ownership.