CPA / Professional Advisor: Assist Your Client In Preparing Their Business for Sale

by Martin Hansen

CPA / Professional Advisor: Assist Your Client In Preparing Their Business for Sale

When assisting your client with preparing their business for sale or for a valuation by a third party, it’s important to remember that first impressions are critical to a prospective buyer. To ensure your client passes the “curb appeal” test, complete these two steps.

Step One: Documentation

Assist your client with getting their business documentation in order. This means everything from A-Z. Consider the list below as a sort of a “catch-all.”  Some of the items below may not be available or applicable, however if you or client have something close, it’s best to prepare it for review by the buyer(s).  For more assistance and checklists for  prepping your client’s business for sale, consider using DealMaker360 Pro Edition.

  • Personal Financial Statement Form for Buyer to Complete – this step is important for your client – assist them with making sure the buyer is reasonably qualified to buy and is not just “kicking tires” and that they’re not a competitor checking your client’s info out
  • Financial Statements and Tax Returns for the Current and Past Two Years (if applicable) – buyers will need the “numbers,” so assist your client with getting these ready and in the correct format
  • Accounts Payable and Accounts Receivables Aging Reports – these will be important for a buyer to understand the cost of running the business (you can assist your client with redacting customer names if necessary)
  • List of Fixtures, Furnishings and Equipment with Value Detail – assist your client with creating a list with each asset, and have them place a FMV (fair market value) on each asset, remembering that it’s important to be reasonable with the values
  • Inventory List with Value Detail – if your client’s business has “inventory” – assist them with getting a good handle on what they have and encourage them to liquidate all obsolete or damaged inventory before the buyer reviews
  • Product/Service Descriptions and Price Lists – will be critical to the buyer for the on-going operations of the business
  • Supplier and Distributor Contracts – will be critical to the buyer for the ongoing health of the business
  • Insurance Policies – will be critical to the buyer to understand the type of coverage needed, and the costs associated with coverage
  • Client List and Major Client Contracts – will be critical to the buyer for the ongoing health of the business (assist your client with redacting names until final due diligence)
  • Equipment Leases and/or Loans – assist your client with putting together these type of agreements, if any, as these will need to be paid off or assumed at the close of any transaction
  • Staffing List / Payroll reports – assist your client with putting together the names, titles or job descriptions, and pay rates of all employees and 1099 contractors, as this will be important for a buyer to understand and be comfortable with going forward
  • Employment Manual, Procedures Manual and Safety Program – assist your client with putting these together if available as they will be important to the buyer. Also, it’s quite possible that having these in place will increase the value of your client’s business by reducing the perceived “risk” for the buyer(s)
  • Building and/or Office Lease/Purchase – if your client is the seller, and their company is leasing a building, prepare copies of the all lease agreements so the buyer can review and prepare to assume the lease. If the client owns the building and wishes to lease to the new buyer, assist your client with “knowing” the market and what terms your client should expect from the buyer of the business. If your client desires to sell the real property with the sale of the business, commission either a full or curb-side appraisal to understand the market and value.
  • Asset Depreciation Schedule from Tax Return – depreciation can be important to a buyer, so assist your client with this task, as well as providing (or arranging for) tax counsel related to purchase price allocation
  • Business Licenses, Certificates and Permits – if applicable, these will be critical to the buyer for ongoing operations of the business. Assist your client in collecting the right documents
  • Corporate/Business Legal Structure and Ownership Documents – regardless of whether your client’s business is an LLC, “S” or “C” Corporation, or a Sole Proprietorship, assist your client with preparing all the documentation of the business’s legal (tax reporting) structure for review by the buyer
  • Prepare other documents unique to your client’s business, as well as photos of inside and outside of the business

Step 2

Get your location(s) in “inspection grade shape.” Be the eyes and ears for your client. Their place of business must show well.  Assist your client with the tasks below to ensure that they receive maximum value for everything related to the business and any real property they inhabit.  Look at their operation as a buyer would, and assist them getting it in great shape for the eventual buyer tours.

  • Office Space – have your client remove all “clutter.” Organize everything, and repair or replace anything broken, old or “ugly.” Then walk through the offices to validate their opinion of what needed to be repaired or replaced. If necessary, make constructive suggestions – this is critical. The process is very much like assisting your client getting their home “staged” so they can list it for sale.
  • Yard Space – have your client clean and straighten it completely. Rid the yard of broken-down items, remove any perceived safety hazards, along with anything that would be considered waste – hazardous or not.  Confirm the yard looks lineal, therefore organized.
  • Shop/Manufacturing Space – have your client organize it completely. Rid the shop space of any waste, trash, and improper signage. Make sure all washrooms are clean, organized, and free of anything that is not part the “restroom” experience.  Clean all equipment/machinery, and confirm that all is in good working order. If not, fix it, part it out, or sell it.  Confirm all employment-related signage and safety requirements are up to date. As a quick example, if your client’s business revolves around safety, make sure their lines are re-painted – this shows they care about safety.

Now that your client has all their business documentation in order and the business property is “ship-shape” inside and out, their business is officially ready to market for sale. For a results-driven workflow to guide the entire transaction, including assisting your client with the process of prepping their business, consider using DealMaker360. Good luck!

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