What Are the Top 10 Must-Have Items for Your Business Selling Checklist Pre-LOI and Post-LOI?

Note: This article was written with the help of our AI-based financial analyst.

Selling your business can feel like a daunting challenge, especially if it’s your first experience. A well-organized plan can make this process smoother and improve your chances of a successful sale.

Apply Here: Free Valuation Application For Sellers 

If Interested In Exploring A Potential Sale Of Your Business

This article will help you identify the top 10 must-have items for your business selling checklist, both before and after the Letter of Intent (LOI) is signed.

Whether you're preparing to enter the market or have just begun negotiations, having a clear checklist will simplify the process.

The Role of the LOI in Selling Your Business

Understanding the importance of the LOI is critical as you embark on this journey. The LOI outlines the basic terms and conditions of a potential sale. It's the foundation for deeper negotiations.

Proper preparation can not only influence your selling price but also attract the right buyers.

Knowing what potential buyers expect is key, both prior to and following their expression of intent.

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Pre-LOI Checklist Essentials (Before Any "Offers")

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Getting your business ready for sale requires attention to detail regarding all documentation and assets.

Here are the essential items to prioritize before a buyer submits a Letter of Intent.

1. Free Business Valuation

• A professional business valuation helps you understand what your business is worth.

• This assessment supports a realistic asking price and offers transparency regarding financial health, which is appealing to buyers.

• We offer a Free Valuation Application For Sellers To Start in order to set expectations of valuation and overview of what is possible.

Required: 3-years of Historical Profit & Loss (P&L) and 3-years of Historical Balance Sheet.

2. 3-Years Financial Statements (And Eventually 3-Years Taxes)

Prepare:

• Comprehensive financial statements covering at least the past three years, including profit and loss statements, balance sheets, and cash flow statements.

• Buyers often look for trends, so being able to show a consistent revenue growth and stable profits is important.

• Have your tax returns handy as well. Often times Buyers and Lenders ask for those in the early stages, so a redacted version is provided to the other side under NDA after vetting.

Detailed financial sheets ready for review.

3. Legal Documents

Prepare:

• Gather all essential legal documents such as licenses, contracts, leases, and intellectual property documentation.

• Pull the organization documents for your LLC.'s, C-Corporations, S-Corporations, etc. along with documentation you think the new Owner will want to receive in the deal. Put yourself in their shoes.

• Having everything organized can drastically cut down the time spent on due diligence and reassure buyers about your business's legitimacy.

4. Operational Documentation

Prepare:

• Compiling manuals, standard operating procedures, and employee handbooks gives buyers insight into your operations.

• This documentation reflects the value of the systems you've implemented and assures buyers that the business can run smoothly post-sale.

• Systems and people can go a long way in maximizing the value of your business.

5. Key Customer Relationships

Prepare:

• List key customers and suppliers along with contact info and service agreements.

• Research shows that a strong customer base can enhance a business's value by as much as 20%.

• Buyers often factor in these relationships when making decisions - and you know your customers better than anyone.

6. Employees and Management Structure

Prepare:

• Outlining your management structure, including roles and responsibilities, helps buyers understand the operational facet of your business.

• A well-defined structure can lead to improved employee retention, which is crucial for a smooth transition.

7. Tax Returns

Prepare:

• Have your business tax returns for the last three years ready. Buyers typically require this financial data to assess stability.

• An impressive track record of paying taxes can build trust and reduce perceived risk.

• Given the sensitivity, there is a way to distribute documents during the process to serious bidders only. We follow traditional Business Advisor guidelines.

8. Real Estate and Assets

Prepare:

• If applicable, compile documentation related to real estate or physical assets, such as property deeds and equipment lists.

• This information validates ownership and helps set a fair valuation, potentially increasing the selling price.

9. Marketing Overview

Prepare:

• Summarize your marketing strategies and customer acquisition costs.

• Buyers appreciate understanding how you've attracted customers, and providing clear metrics can showcase your brand’s effectiveness and market position.

• If you sign up for a Free Valuation For Sellers we can also provide a process overview for you on how we can contact buyers directly

• Our social media community of 120,000 followers and 20,000-40,000 average daily views (13M Total).

Advertising is one of the #1 topic that Small Business Business Advisors talk about. We believe we have an advantage there.

10. Exit Strategy

Prepare:

• Create a clear exit strategy outlining your plans post-sale.

• This can include specifics about ongoing involvement or transitions.

• Demonstrating foresight can reassure buyers about the business's future.

• Also provides you the opportunity to design your retirement and how you (and your family) would like you to step away from your long time business.

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Post-LOI Checklist Essentials ("After Offer")

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Once the LOI is signed, you’ll enter due diligence and finalize the sale in exclusivity.

Having key items prepared for this stage will ensure a smoother transition. Put yourself in the "Buyer's Shoes" and ask yourself what they would want.

1. Due Diligence Documents

Prepare:

• Prepare for potential requests for more detailed documentation during the due diligence phase.

• This may involve deeper financial details or operational reviews—having this ready saves time and builds buyer confidence.

2. Non-Disclosure Agreement (NDA) - If Not Done Already

Prepare:

• Implement an NDA before sharing sensitive information.

• This document safeguards your business's confidential information and intellectual property throughout the sale process, ensuring peace of mind.

3. Documentation of Signed Contracts

Prepare:

• Keep a thorough record of all signed contracts.

• This clarity with existing agreements aids in preventing misunderstandings, which can lead to smoother negotiations.

Include all important documentation for the business

4. Real Estate Appraisal

Prepare:

• If your business includes real estate, obtaining an appraisal can clarify its value for both parties.

• Accurate appraisals reduce disputes and ensure a fair agreement, which can help maintain focus on other sale elements.

5. Employee Transition Plan

Prepare:

• Plan how employees will transition after the sale.

• Clear communication about their roles helps minimize disruptions and provides a smoother adjustment period for the incoming management.

6. Buyer Financing Information (Broker's Job To Summarize)

Prepare:

• Request information from buyers regarding their financing arrangements.

• Knowing their financial backing can help you gauge their seriousness and ability to follow through with the purchase.

• Required: Ask for a "proof of funds" to ensure that Buyer can complete the deal

7. Quality of Earnings Report (Optional - Buyer Will Run As Well)

Prepare:

• Creating a Quality of Earnings (QoE) report portrays a detailed picture of revenue streams.

• This report simplifies the buyer’s review process and can significantly improve their confidence in the transaction.

• Usually run by the Buyer - but can increasingly be run by Seller as well

8. Post-Sale Support Plan

Prepare:

• Develop a plan

• Outline what support you will offer after the sale.

• Whether it includes training the new owners or providing consulting, this plan can alleviate buyer concerns about the transition.

• Some are block periods, with consulting periods afterwards for work as needed

9. Inform Legal and Financial Professionals

Prepare:

• Keep your legal and financial advisors updated on progress.

• Their involvement may be essential during this phase, and having them on standby can speed up the process.

• Inform them as new process steps come up (LOI phase, exclusivity, potential closing timelines)

10. Final Sale Agreement

Prepare:

• Draft a final sale agreement that includes all terms discussed. (with lawyers)

• A comprehensive contract protects both you and the buyer, covering every aspect of the deal to prevent future disputes.

• Prepare for any final changes on the deal - things can shift last minute

Preparing for a Successful Sale

Preparing to sell your business is a complex but manageable process that demands attention to detail. Hopefully above is a good introductory "primer".

By following these checklists, you can try to get ahead of the mountain of paperwork involved in a deal.

Taking the time to organize your materials not only enhances your appeal to potential buyers but also simplifies the sale process.

Whether you are just starting or are in the heat of negotiations, these steps will assist you in navigating this pivotal chapter in your business journey.

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