Business sales – attributes and barriers – poor records or lack of information
My sixth and final blog in this series on business sales considers the information you may need to provide when selling your business.
Poor records or lack of information
Are your records up to date? Can you identify and explain the ‘story’ behind your financial records? When you are selling your business, it is important to be able to clearly explain the operations of the business on both a commercial / operating level and at a financial level.
Depending on the type of potential buyer you are seeking they may need to obtain an understanding of the business from the daily operations right through to long term business development. Additionally, they will need to understand what the assets and liabilities of the company are as well understanding how the activity of the company has changed over recent years.
It is not uncommon to be asked a lot of questions about your business, for example:
- Who are your main customers?
- How long have you supplied to them?
- What contracts are in place?
- How often do you have to requote for the work?
- What percentage of requoted work do you retain?
Any change in the level of activity is also likely to be questioned, for example:
- What is the reason for the increased turnover?
- Why has the gross margin changed from one year to another?
- Why have the overhead costs changed from one year to another?
These sorts of questions are usually raised during initial discussions or during due diligence. Due diligence is designed to allow the potential purchaser the opportunity to confirm and verify the business they are buying, therefore the information they request and questions they may ask can be numerous.
It may not be possible to answer all of the questions received due to record or system restrictions, however the more information that can be provided the more confident your potential purchaser should be about the transaction.
If you would like to discuss the potential sale of a business and the possible information requirements that may be required of you, we would be pleased to discuss the matter further.