The Financial Documents Needed to Sell Your Business

The Financial Documents Needed to Sell Your Business

It is our job to help prepare a seller and their business for the sale process and part of this discussion is identifying the records and documents we will need to substantiate the business and answer the question for our seller, "How much is my business worth?"

At the start of working with a seller it is necessary to evaluate their business and provide a valuation of its worth as a starting point for determining the sales price. At this point access to their total sales and earnings from the prior year will suffice to calculate an estimated valuation. To calculate the seller's discretionary earnings (SDE), profit and loss statements (P&L) or the previous year's tax returns are required. These documents will outline the business's revenue, earnings and deductions which can then be used to calculate the SDE.

Moving forward after the Marketing Agreement (MA) is signed and the broker begins the work of marketing the business, they will need three years of P&L's and tax returns. These documents are required to apply for lender pre-approval of the business as well as to develop a recast (a general financial statement) of the business to provide to qualified buyer's.

It may sound nerve racking sharing all of this financial information with your broker, but this is why we have non-disclosure agreements (NDA). All buyers must sign an NDA prior to receiving any detailed information about a business, other than the blind ad. The NDA makes it illegal for anyone to disclose information about your business without legal implications.

To discuss how to sell your business or how much you can sell your business for more in depth, I invite you to schedule a consultation with one of our experienced brokers today!  

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 Rachael Holstein joined the Transworld Team in 2016 as Marketing Coordinator. Her working experience has been largely focused on Business Development and Marketing in the finance, architecture, property management, and information technology industries. A longtime resident of Cleveland, Ohio, she attained her Undergrad from John Carroll University and a Master?s Degree in Global Interactions from Cleveland State University. She relocated to Denver in 2013 for a change of scenery and a bit of adventure.