Most owners prepare for a sale by thinking about price. Buyers prepare by thinking about everything else. A private equity group sends a diligence request list that can run to a few hundred lines. A competitor goes straight to your customers and your people. A family group or an individual buyer depends on a lender who has a list of its own. The lists differ, but the core is the same, and an owner who has it ready before the first serious conversation sells from a stronger position than one who assembles it under a letter of intent.
1. The earnings, and support for every add-back
Three years of financial statements plus the current year to date, reconciled to your tax returns. Then the add-back list: each personal or one-time expense you believe a buyer should add back to earnings, with the invoice, statement or explanation behind it. This is where earnings get made or lost. A private equity buyer will test the list with an outside accounting review. A competitor will compare your margins with its own and question anything that looks too good. A lender will accept only what it can document. An add-back you cannot support is a number the buyer will remove.
2. Your customers and your suppliers
A list of your top customers by revenue for each of the last three years, with how long each has bought from you and whether there is a written agreement or only a history. Every buyer will ask about concentration. If one customer is a large share of sales, have the story ready: how long the relationship has run, who manages it and what would happen if it ended. On the supply side, know which agreements you hold, which product lines are exclusive and whether those agreements can transfer to a new owner. A foreign acquirer buying a way into the U.S. market will often care about the supplier side as much as the customer list.
3. Your people, and who holds the relationships
An organization chart, a list of key employees with tenure and pay, and an honest note on who holds which customer and supplier relationships. Buyers know that in many companies this size the owner is the relationship. A private equity group needs a management layer that stays after the sale. A competitor may already have people in some of your roles and will look hardest at the ones it lacks. Think now about which employees are essential to the transition and what it would take to keep them, but be careful about who you tell and when.
4. The property, the equipment and the paper
If you own the real estate, decide whether it is part of the sale or will be leased to the buyer. If you lease, know the term, the renewal options and whether the landlord must consent to a transfer. For a manufacturer, an equipment list with age and condition. Then the paper a buyer's attorney will ask for: entity documents, any shareholder or buy-sell agreement, permits and licenses, insurance, open claims, and any personal guarantees you have signed on the company's behalf. Missing documents rarely kill a deal. Finding them in a hurry slows one down and makes the buyer wonder what else is missing.
5. Your own terms
The last item is the one owners skip. Decide what you need to receive after tax for a sale to be worth doing, and talk to your tax adviser before a letter of intent arrives, not after. Decide how long you are willing to stay, and in what role. Decide what you will not accept, whether that is a large earnout, a long employment term or a buyer who would close your location. If a spouse, partner or family member has a say, have that conversation first. Each buyer type will propose different terms, and you can only judge them against a position you already hold.
The takeaway
The documents a buyer asks for are predictable, and so are the questions about people and terms. Gather the first four items before a serious buyer arrives and settle the fifth with the people whose opinion matters to you. Then the first offer becomes something you can measure rather than something you have to react to.
