19 Essentials to Ensure a Smooth Business Sale

Due Diligence Checklist: Items for the Bank and Buyer

When preparing your business for a sale or for a bank evaluation, it’s crucial to have all the necessary documentation ready. Below is a checklist of key due diligence items to ensure a smooth process.

1. Gather Items Early

The saying “time kills deals” holds true. To avoid delays, it’s best to compile the items listed below as soon as possible.

2. Signed Offer or Letter of Intent

Provide a fully signed copy of the agreed-upon Offer or Letter of Intent, with attachments. Ideally, these documents should be in PDF format.

3. Year-End Corporate Financial Statements

Submit the Profit and Loss Statement (P&L) and Balance Sheet for the last three years, as well as the current year-to-date.

4. Tax Returns

Include copies of your business’s last three years of tax returns, with all attachments.

5. Business Premises Lease

If your business operates from leased premises, provide a copy of the Business Premises Lease along with all addendums, including the Security Deposit and transfer fees. If you own the property, include its fair market value.

6. Business Photos

Take snapshot photos of both the interior and exterior of your business using your cell phone.

7. List of Assets

Prepare a list of assets with a fair market value of $500 or more, including serial numbers, approximate age, and fair market value. For motor vehicles, state the model, year, and mileage.

8. Excluded Items

List any items not included in the sale.

9. Loans or Leased Assets

Identify if any of the listed assets have loans against them or if they are leased.

10. Top Customers

Provide a list of your top five customers by sales volume, without revealing names, based on the prior year’s total sales.

11. Employee Payments

Are there any employees not receiving a year-end 1099 or W-2?

12. Extraordinary Expenses

List any recent extraordinary expenses (e.g., new A/C units, new assets, new flooring, new furniture).

13. Workers’ Compensation Claims

Disclose if there are any Workers’ Comp Claims.

14. Personal Auto Expenses

If you run any personal auto expenses through the business, provide details.

15. Business History

When did your business open? Did you purchase it from someone else? Provide relevant background information.

16. Competitive Advantage

What makes your business different from others in the market? Highlight unique aspects.

17. Accounts Receivable Aging

Provide an A/R aging report breaking down receivables by 30, 60, 90, 120 days or more.

18. Organizational Chart

Include an organizational chart, but exclude names for confidentiality.

19. Get Professional Guidance

For expert advice and a free consultation, contact Bob Dolan, Business Broker & Licensed Real Estate Broker, at 954-579-4687. If you want straight talk, ask Bob.

This checklist offers a solid foundation for assessing your business’s value. Whether you’re preparing for a sale or planning for growth, having accurate insights and expert guidance ensures a smoother transaction.