You may find that during the preparation of your business, from what you achieve by gathering all the information and generally improving operations, you could find a reason to increase the value of your business.

Further, it is a time to identify outstanding problems within your business so that they can be rectified before the potential buyer finds them. The lack of existing problems within the business will give you reason to maintain your asking price and will also give the potential buyer confidence of a successful business.

4a) Financial Statements and Documentation

These will always be one of the main interests for the buyer so it is important that you prepare up to date financial statements to reflect the performance of your business. The potential buyer will then make his/her own judgements as to whether the business will be profitable in the future as well as analyzing the current financial position. You should be able to provide financial statements for at least the last three years (five years, favourably).

In most cases, the potential buyer will ask for audited accounts, but for many small businesses, it is not a legal demand to provide these. Audited accounts will be seen more dependable than accounts that have been provided by yourself and therefore you should recognise that failing to provide them could cost you the sale. Ok, audited accounts are indeed costly, but it will be worthwhile if it makes you more favourable and trustworthy in the eyes of the potential buyer. Alternatively, you could always ask the potential buyer if they are willing to pay for the audited accounts themselves.

Your previous profit & loss accounts will need some attention if you have shown less profit than the actual figure to reduce tax. Buyers do not want to see your ability to reduce tax: they want to see evidence of profitability. In which case, you may try to reconstruct your profit & loss accounts from previous years to reflect higher profits by minimising costs as much as possible. By doing so, you may be liable to pay back unpaid taxes and any incurring penalties. If you do not intend to sell your business for, say, the next three years, it may be wise to lean your accounts to show as much profitability until then. This way, the extra tax you have to pay will be compensated for by the extra value that you can place on your business.

You will also need to prepare all tax documentation such as personal tax returns, sales tax returns, employment tax returns, etc to correspond with the accounts you have obtained for the last 3-5 years.

Be prepared to answer questions concerning your financial history, transactions and current position by identifying key issues that the potential buyer may pick up on. For example, a period where sales revenue was low or the need for excessive borrowing etc. Do not try to bend the truth if it is unfavourable, but try to show how you controlled the issue and why it was necessary to do what you did (even if you went through hell, play the issue down a little).

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