Whats Expected When Selling a High Dollar Business?

[Toiletcake]

Ive been through a 6 figure sales and the standard items were needed to prove that your business is what its claiming to be.

1. Bank Statements- the most current year was priority
2. Returns
3. w-9s for employees
4. Fixed expense bills and statements.

I am wondering what is expected in terms of record keeping when the time comes to sell your 7 figure business.

How is the process of due diligence different if at all?

 

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[hatterasguy]

I know a guy who sold a 9 figure air transport business and it involved a bus load of lawyers and accountants reviewing the company, than managers from the company that was buying them making the switch. They went over all the aircraft, books, client lists/contracts etc.

 

[Knightsman]

The good ole sayings, Have all your ducks in a row

 

[MJ DeMarco]

Due diligence and lawyers!

Expect strangers to investigate everything about your business ... from finances to customer relations. My sale took forever because the lawyers had to draft documents the size of the current health care bill.

Any yes, better record keeping is urged as that would have made the sale move faster! If you can reduce risk and document everything, the sale is more likely to go through.

 

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[Toiletcake]

Kind of what I thought but wasnt sure if there were some new tactics I wasnt sure about.

Thanks

 

[GlobalWealth]

If you plan to sell your company, start your planning early. You need to make sure you aren't treating the company like your personal checkbook. You want the company to look profitable on the books. You need all corp documentation up to date and in all federal and state compliance. Accounting records must be perfect. It took me about 1 year to sell my business.

 

[Toiletcake]

Its funny you said that. I seem to write off a lot of expenses in the business but I though the "adding back" for owners benefit was in place for this reason. Honestly, how else can a business owner show the potential owner what the true earning capacity is?

Are you suggesting showing all gains in true fashion? That would increase the tax liability a substantial amount.

 

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[GlobalWealth]

Its funny you said that. I seem to write off a lot of expenses in the business but I though the "adding back" for owners benefit was in place for this reason. Honestly, how else can a business owner show the potential owner what the true earning capacity is?

Are you suggesting showing all gains in true fashion? That would increase the tax liability a substantial amount.

for this question, it would depend on the size of the business and the buyer. if your business is going to sell for $1m, then you just need to keep accurate records of "personal" expenses to add back for valuation. If your business is selling for $20m, then you shouldn't be buying that Lambo or airplane through the company as biz expenses. this is a red flag to buyers.

 

[Toiletcake]

Agreed, I was asking about 7 figure sales initially, in the 3-5m range. Im thinking the add backs and Quickbooks will provide a good basis. Thanks for your insight.

 

[CommonCents]

I sold a couple companies over the last 10 yrs, one sold to a fortune 200. Lots of due diligence. Get an accountant and M&A attorney to help you. I hired an investment banker as well. There are plenty of firms that specialize in small/medium size businesses. (a definite cut above your standard business brokers). This can be a mine field. Make sure you look at recasting eligible items on your financials since a biz owner will make decisions and accounting to minimize tax burden but this can depress the actual profit potential (hence value especially at some multiple of earnings) at sale time.

 

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