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Selling a Business? How to Organize Your Documents for the Due Diligence Process

There are many aspects of selling a business that have to be considered. Legal, accounting, financial, operations, human resources and much more.

Potential buyers of a business need to know they can access all the relevant information to the sale.

Providing business information in a logical, organized format for all buyers not only helps build trust during the sale process but can reduce the time it takes a potential buyer to complete their due diligence analysis.

The 3 Critical Steps to Organizing Information when Selling Your Business

We believe there are 3 critical factors in providing information for the due diligence process:

  1. The seller must make sure all relevant documents are provided. There is no missing information that buyers will have to additionally request. It is important the seller anticipates all questions that a buyer may have.
  2. All documents are organized in a logical manner for potential buyers to review. No time is wasted by buyers trying to find information about the business or claiming they were not given the information. All documents must be clearly labelled and organized for easy review.
  3. All documents are in a single, secure location that gives equal access to information for all buyers. By locating all the documents in a secure, online location the sellers can guarantee security and control of their information. The buyers know they all have equal access to the same sale information.

By taking the time to locate every relevant document, organizing the information in a logical format and presenting this information in a secure, online location, business sellers reduce or even eliminate any frustration in the due diligence process.

The 7 Groups of Document to present for Due Diligence

Every business is unique and every business sale will have its own distinctive characteristics.

However, every business sale has common documents and information that must be provided such as legal, financial and tax. Knowing this helps us group and organize information for due diligence.

The 7 main document groups we suggest the sellers of businesses use to organize their information are:

  1. Legal Situation
  2. Tax Situation and Financial & Economic Situation
  3. Market, Industry and Strategy
  4. Environmental
  5. Insurance Coverage
  6. Technology Situation
  7. Employee Situation

This framework provides an easy to understand reference for buyers.

Storing documents for the Due Diligence Process

Once you have organized your documents for due diligence, they can be presented to all potential buyers via a secure but easy to use online service.

You need to make sure that potential buyers see the same version of each document and no altering of documents can be undertaken by the potential buyers. This usually requires sellers to use a specialist, online data room service to securely hold their due diligence documents.

For more information on this proven approach to organizing your key documents for the due diligence process, visit www.due-diligence-checklist.net to download a free, detailed 30 page checklist.