Why Keeping Records Helps You Sell Your Business

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If you’re a business owner, the thought of selling your business might have crossed your mind. Whether it’s for retirement, a change in direction, or any other reason, being prepared to sell is crucial. One of the most underrated yet essential factors in selling your business is the maintenance and organisation of your business records.

 

Why You Need to Keep Business Records

  1. Valuation: To accurately value your business, potential buyers and valuation experts will rely on your financial and operational records. A well-maintained set of records provides clarity about your business’s performance and its potential.
  2. Transparency and Trust: Clean records give potential buyers confidence. They demonstrate that you run an organised, transparent, and legitimate operation.
  3. Smooth Transition: Detailed records, especially concerning operational processes, will make the transition to new ownership much smoother.
  4. Regulatory Compliance: Maintaining necessary business records ensures that you’re in compliance with local, state, and federal regulations. When selling, demonstrating that you’re compliant with all regulations can be a significant selling point.

What Business Records Do I Need?

The specifics might vary based on your industry and the size of your business, but here’s a general list:

  1. Financial Records: This includes balance sheets, profit and loss statements, cash flow statements, tax returns, and other financial statements from at least the past three years.
  2. Operational Records: Inventory lists, client lists, supplier agreements, employee contracts, and any standard operating procedures.
  3. Legal Documents: Business licences, permits, articles of incorporation, shareholder agreements, patents, trademarks, and any litigation records.
    Assets: Information on business property, vehicles, equipment, and any other significant assets.
  4. Contracts and Agreements: This covers client contracts, supplier agreements, lease agreements, and any other contractual obligations or rights.

In the process of selling a business, there’s a phase known as ‘due diligence.’ This is when potential buyers assess the business to ensure everything is as it seems. It’s a rigorous evaluation process, and it’s where your well-maintained records become invaluable. When a buyer performs due diligence, they want to see every detail about the business. With your records readily available, this process becomes more straightforward and more efficient.

Do I Need All These Documents?

While the list may seem extensive, the answer is, more often than not, yes. The exact records you need might vary based on the nature of your business and the expectations of potential buyers. However, having a comprehensive set of records will only serve to bolster your selling position.

Keeping meticulous records isn’t just a business best practice—it’s a strategic move that can significantly affect the sale of your business. Whether you’re considering selling in the near future or years down the line, it pays to keep your records organised and up-to-date. The effort you invest in this area now will reap significant rewards when the time comes to hand over the reins to a new owner.

Need guidance or resources to streamline your documentation? [Click here] to get started and ensure your business stands out to potential buyers!

 

Interested in Buying or Selling a Business?

For expert guidance and assistance, reach out to our Managing Partner, Greg Johnson. With credentials as a Certified Practicing Accountant, Certified Exit Planner, and Business Broker, he’s equipped to help you navigate the process seamlessly.

Contact Greg Johnson today!


Contact Ascend Business Partners today on 03 8794 7777 or ascend@ascendpartners.com.au to have a discussion about your business and financial goals. Or simply book a free 1-hour “Time to REFIRE” workshop with Greg!

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