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Order, Please!

If you're selling your business, the due diligence process of gathering pertinent company data can be daunting and one big hairy distraction if you don't have your company documents in order. Having well-organized, easy-to-access company documents will make for a less stressful sale and a smooth post-sale transition, whether you're selling soon or some time in the future.

There's no reason to wait for selling your business or enacting your leadership succession plan to get organized. Instead, taking your time and engaging the appropriate team members to organize company documents using a well thought out plan and timeline will create better outcomes.

Whether you're selling, hiring a new leader, or even bringing on a new accounting firm, here's an overview of what you need to get your company ready to sell.

Get Your Documents In Order

Don't wait to do this until you sell your business and a buyer requests the necessary due diligence documents. We have found that often sellers' documents are not in order, are inaccurate, or can't easily be found when the buyer asks for them. When selling, the seller has to present professional, accurate documents quickly. If it takes too long to gather requested materials, you could lose a potential buyer. If the documents are not accurate, the seller can lose credibility. The buyer needs to know that the company they are interested in is buttoned-up, and there are no red flags in crucial documents that are hard or impossible to locate. Check for things like a clearly laid out company ownership structure; fully executed contracts with key suppliers (you would be surprised at how many contracts don't get countersigned); up-to-date insurance records, and many other corporate-level records.

Everything the buyer sees—from the website to marketing materials to the exterior of the building—will tell the story of your business. That story must align with the one you want to tell a buyer. A seller must be organized, clean, and appealing. A seller needs to show the buyer how well run the company is. This is done, in large part, through the documents provided to the potential buyer. A seller's business plans must be current, including detailed growth plans. Debt agreements should include valuations on listed assets. The company's financials must be GAAP compliant, and company meeting minutes should be up-to-date before marketing any company to potential buyers.

Clean Up Financial Statements

The profit/loss statements and balance sheets are critical pieces of documentation to clear up before going to potential buyers. Clear any odd one-off entries that don't tie into your business. For example, as an owner, you may, at times, loan key employees money. If the accountant places the loans on the balance sheet as a receivable asset, they must be clear those before selling. Something else to look at is the number of line item details on the profit/loss statement. Many business owners have a large number of line items as it can provide more detail into productivity. Most buyers that are not close to a given business do not care about these details, so these numbers confuse things and should be rolled up for buyer clarity.

Break Down Departments

Whether you decide to gather documents electronically or by hand, make sure to break the company documents down into departments—human resources, legal, finance, operations, marketing, sales, client services, sourcing, real-estate facilities, technology, and distribution—and gather the data to support each statement within each department. This makes it much easier for the buyer to access the exact information he or she is looking for.

Get Organized

We see over and over that nothing turns a buyer off more quickly than disorganized or missing documents. Many sellers use bookkeeping software such as QuickBooks to organize their documents. They think the fact that files exist within QuickBooks is enough for the seller. They don't think about the entries within QuickBooks that won't make any sense to the buyer. If a buyer asks a question about a specific entry, the seller can't say, "Oh, that was a loan we gave to Uncle Frank three years ago." Your documents must be straightforward and easy to understand.

Nothing turns a buyer off more quickly than disorganized or missing documents.

Software programs such as Smartsheet can help organize these documents. Smartsheet keeps documents in a confidential digital format that is easy to upload, edit, share and track views and updates. There are many others, and the platform for sharing documents may vary based a sellers unique needs or on the buyer's preference. In any case, be prepared to provide documents in a digital format. This may mean scanning a sixty-page environmental study to be uploaded for review. At a minimum, regardless of your business size or industry, most buyers will look for the following reports as broken down by topic:

Company Overview

  • Years in business

  • Clearly laid out company ownership structure

  • How your company makes money

  • Type of business (i.e., manufacturing, service, wholesale, retail)


  • How your company goes to market

  • How you solve clients' needs

  • Brand standards and list of marketing material and other or items that have your brand on them


  • Monthly profit/loss (P/L) statements for the last twelve months, year-to-date, and previous two years presented in an organized way that a buyer can understand

  • Monthly profit/loss (P/L) statements for the last twelve months, days (make sure to write off any bad debt your company may be carrying)


  • Provide a list of the software platforms your company uses, your technology security plan, an overview of systems you're using, workflow, processes, and a current list of licenses

  • Detailed processes and procedures provide additional value to a buyer. If your company uses industry-standard management software, it can be viewed as a positive in the sales process

Human Resources Organizational Chart

  • Organizational charts for the entire company

  • Payroll report and company benefits package

  • Review dates with a history of increases

  • Departmental responsibilities overview that includes what each group does

  • Employee manuals

  • Job descriptions

It's critical that as a business builds its document library, a process is documented for each of its departments. What does Jason in accounts payable do, and how does he do it? The point here is that even if the owner or key managers know the company processes, a buyer will not. They will not know what to do if Jason leaves or goes on vacation. Remember, in many cases, buyers will bring a seller's business into theirs. Detailed processes make this much easier to do.

If a company's processes are not in place, a buyer may feel it's too challenging to integrate the two companies and will walk away from the deal or discount the price based on the additional expense of bringing the two companies together.

Many businesses have great staff who have created a company document repository that provides easy access to current, key documents. If not, now is the time to begin gathering your corporate documents. Doing this may feel like trying to eat an elephant. But if you follow the old adage and take it one bite at a time, you're ready when it comes time to sell or initiate a succession plan. Create a plan and realistic timeline or get assistance from your CPA firm or business advisory firm. Consider assigning some aspects of this project to appropriate employees as part of an annual goal.

Working with a professional business advisor will help you in your exit planning or sale of your business. If you need help preparing corporation documents, creating a business valuation, or updating an existing one before you're ready to sell, contact Paradise Capital. Our team of experienced business professionals brings 50+ combined years of marketing, communications, finance, business planning, and acquisition services working with a variety of brands.

Jack Nermyr is a Finance and Valuation Analyst at Paradise Capital and a graduate of the University of Minnesota, Carlson School of Management. Having worked with dozens of business owners, Jack has found that the truth lies in the numbers and uses his expertise to maximize our clients' business value.


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