Closely Held Business Advisor: Preparing to Sell Your Business

If you are looking to sell your business, there are many things you can do to position yourself to look better to a buyer. Starting to prepare one to two years before you go to market will make the process go more smoothly and hopefully attract multiple suitors. Below are some things you can start doing now to get ahead of the process.

Company and Employee Documents

Ensure you have all of the company-related documents such as the operating agreement, articles of incorporation and required government permits. Review all employee files for proper documentation. It is helpful to have an organization chart with job descriptions available. If you have contracts with customers, make sure they are available and signed.

Consider organizing all company and customer documents in one place, such as a network drive, for quick access.

Audited Financial Statements

Have your books in order and be prepared to produce the past three years of your financial statements to show trends of the business. Consider having a professional audit or review as most buyers will require an audit prepared by a reputable CPA firm before they will purchase a company.

Tax Compliance

Buyers will be looking for any financial exposure, and taxes are always the first place to look. Collect your past three years of income tax, sales tax and payroll tax returns and have in one place. Sales and use tax compliance are increasing in scrutiny from the states every year so consider having a CPA firm review your sales tax practices. If you have customers who are exempt from sales taxes, make sure you have copies of their sales tax exemption certificates. Most companies are scrambling to obtain these during due diligence.

Software Licensing

Another area of potential exposure is software licensing. You will want to make sure you are properly licensed for all of the software your company is using to run the business. Depending on the type of company, this can be an area a buyer would want to review closely.

Clean up the Balance Sheet and Income Statement

Divest of any non-business assets and get the ‘family” out of the business. Many closely held businesses have personal expenses running through, and buyers will want to value the company without those expenses. 


Create up to a three-year forecast that is reasonable and has some level of detail. Buyers are valuing companies on future cash flows, so a believable forecast showing you know what the potential is can be a big help in negotiating a favorable valuation.


Selling your company can be time-consuming and is typically something you do not want your employees to know is taking place. The due diligence process will require weeks of data gathering, meetings and possibly travel. Many closely held business owners are running day-to-day operations also, so make sure you have help during this process so as not to disrupt business.


As with any life-changing event, consult with professionals for advice before you enter into a transaction. Consult your accountant and attorney for tax planning and deal structuring. You may also consider hiring a business broker or investment banker who will help market your business to potential buyers. No matter where you are in this process, your Closely Held Business Advisor at Elliott Davis Decosimo can help guide you through this important stage of your business and life.