What to Prepare If You're Selling Your Business

Have your reports up to date

A key part of selling your business will be the due diligence. This is when your financial statements will be reviewed for accuracy and completeness. For starters, you should have an up to date balance sheet and income statement. This will be an opportunity for you to flex the state and value of your business. Unsure on how to prep these documents? Learn more about income statements and balance sheets and find out more about how Accracy can help with getting your books caught up.

It's recommended that you collect these documents and your tax returns to cover the last three to four years of business activity. Have these documents reviewed by a CPA for accuracy and consistency.

A cash flow statement may also be requested. This is a document that breaks down how cash is entering and leaving your business. These reports are also essential in creating financial forecasts which will help you prove the value of your company. (You can learn more about financial forecasting in our overview).

Communicate about any Paycheck Protection Program loans

The Paycheck Protection Program offered forgivable loans which helped small businesses weather the COVID pandemic. (Review everything you need to know about the PPP here) While it was helpful then, it will be a complication now. Because it is a loan that can be fully or partially forgiven if spent on eligible expenses, there's a lot that needs to be considered in the case of a sale. Your situation will be one of the following:

• You've received your loan and have not used all the funds - You will need to contact your lender to notify them of your intention to sell the company. As part of your PPP loan agreement, the lender must consent to have the loan moved and still be eligible for forgiveness. If you sell your business and transfer your PPP loan, the eligibility for forgiveness may be waived.
• You've received your loan and have used all the funds - Check with your lender first to see if they are able to take a forgiveness application. Notify them of why you are looking to apply for forgiveness to hopefully expedite the process. Having your PPP loan situation resolved will ease the sale greatly.
• You've received your loan and applied for but did not receive full forgiveness - This can now be treated the same as any loan in a sale. You should still notify your lender to make sure they're in the loop in the case of an audit of the PPP loan. If a PPP loan is audited and the buyer has to pay expenses to cover an audit, they may come after you.
• You've received your loan and received full forgiveness - This is the easiest situation of them all. Again, notifying your lender is required in the case of an audit but you won't have to worry about an outstanding loan affecting the sale.

Bring in help where you need it

You're great at running your business and you made it what it is today. But don't shy away from bringing in experts who can help you finish this journey. Some professionals to consider:

• Your financials should always be CPA reviewed for accuracy (our guide on finding a CPA has you covered on what to look for in an accountant)
• An appraiser can take away the guesswork of what your business is worth
• A broker will take a commission but will allow you to keep up day-to-day operations and maximize the sale amount

You are the reason that your business is ready to be sold but professionals can help you get the most out of your business. Since broker's take commissions, they want to maximize the sale to maximize their take.

SCORE, a nonprofit organization working with entrepreneurs, reports that a sale can take 6 months to two years. They also offer free mentoring services for small businesses across America. Having a team of experts backing you will let you focus on continuing to run your business in the meantime.

Have a plan for your profits

When the time comes, make sure you have outlined your financial goals. Don't spend the profits right away (but do take a moment to celebrate!) as you figure out a long-term plan. Consult with a CPA on how the sale can affect your tax year and prepare for tax consequences based on your new found wealth. Speak with a financial advisor if you're looking to maximize the value of the money. Figuring out as much as you can beforehand will mean more time to kick the feet up and relax once the papers are signed and the sale is complete.