Depending on the size of the transaction, due diligence can take the most energy and patience of any step in the sales process. Prepare yourself mentally for a slog. There is no shortcut and it is required to provide almost any requested information to validate your representations in the process of selling your business.

If you have time before going to market and you don’t already use it, invest in QuickBooks to organize and prepare everything that will be needed. Ask your accountant for some help with setting it up. Enter all your sales into the system — you will not be paid for unreported income. Use logical categories to record income so a buyer can see where your sales are coming from.

It is common for buyers to ask for month-by-month financial statements or to see the details of an expense category. Being able to produce these reports can literally make the difference in not just making the sale but receiving the best price possible. If all you have are tax returns, it will cost you dearly when the time comes to sell.

While you have time, ask your staff to save your last three years of bank statement and monthly credit card processing statements, if applicable, as PDF files. If you use credit cards to pay expenses, prepare monthly expense reports allocating the expenses into the appropriate general ledger category and attach receipts to each monthly statement. This practice will give you record-keeping credibility. Set yourself up with a business credit card rather than using your personal credit card for business expenses, and limit the number of credit cards you use for business, if possible.

When you have a chance, make a list of all assets/equipment of your business with a value of $500 or more, including serial numbers, model numbers and estimated street values. Make a list of your employees with wages paid, hours worked, their job functions, how long they have been with you, etc.

Limit discretionary expenses to line items to easily identify them on your profit and loss statement (P&L). Buried individual expenses in cost of goods sold as an example cannot be added back to calculate “owner benefit,” which is the main basis for establishing the price of a business.

P & L statements with limited detail are always of concern to a buyer. You don’t have to go crazy with detail, but be reasonable so you can show what your expenses are in appropriate cost categories.

Having good financial records is probably the most-important value driver for your business, after the amount of owner benefit, sales trajectory, and broad base of repeat customers. Middle management is also a good value driver, as an indication that the business is not just the owner.

Whether you’re a seller or a buyer, if you would like a confidential conversation about how to prepare, contact me on my cell, 954-579-4687, or by e-mail at I have been doing this for more than 45 years. Feel free to Google me and Dolan Sales, Inc. My LinkedIn profile is at