One of the most important and time consuming parts of selling your business is due diligence. Due diligence occurs after a buyer has made an offer that you have accepted. During this time, both the buyer will perform due diligence to understand what is being bought and sold and to firm up the value of the business.

Pre Due Diligence
Prior to soliciting offers for your business, you should have due diligence in mind. The due diligence process can last anywhere from 45 to 120 days. Keep in mind that a deal can fall apart for various reasons during this time. As such, being well prepared will minimize many risks. Keep the following things in mind as you prepare for due diligence.

Records
From the moment you decide to sell your business, you should assemble and put in order the following documents:
• Tax returns
• Profits and loss statements
• Balance sheets
• List of inventory and value
• List of equipment and value
• Supplier and vendor list and contracts
• Client list and contracts
• Lease
• Operation manual
• Corporate documents
• Insurance policies
• Business licenses

Running your business
As you look forward to the sale of your business, it may be tempting to slow down operations. However, this is one of the worst things you could do as a business owner which would eventually reduce the value of your business. You should run the business as efficiently as possible and ensure the operations are running smoothly. Be careful not to make any major changes to your business without first consulting with your advisors and business broker, including any large equipment purchases or investments if the value cannot be recouped in short order. The current performance of your business will be scrutinized during due diligence and value adjusted accordingly.

Disclosure
When you approach business brokers and advisors regarding the sale of your business, be completely forthright about the state of the business and any issues you may be having. Disclosing all skeletons will help you get ahead of the issue and will allow your advisors and business broker to craft a solution that minimizes the negative effects. Failing to disclose any issues will only hinder the due diligence process as buyers will certainly uncover these issues and may lose interest or start to doubt your motivations.

During Due Diligence

Timeliness
During due diligence, the buyer will make requests for information. You should be prompt in your response to these requests. Buyers will be concerned about slow responses and worry that you are trying to conceal something. This is when having all the necessary records and documents in order will be useful.
Work with your broker
• Your business broker will be the middleman between you and the buyers. As such, you should work with them to drive the due diligence process. Your broker has worked on many business transactions and will be a good resource in helping you prepare for the document requests and the questions you will be asked.
• You should also work with your broker to keep up the momentum of the deals. Time is one of the prominent factors when a deal falls apart, so work with the broker to minimize any timing issues.
• Let your broker handle tough negotiations and preserve your own goodwill during due diligence. This will diffuse any tensions and keep the rapport between you and the buyer.
• If you discover something about your business during due diligence or come up against any problems, disclose this information to your broker. The broker will advise you on how to handle the issue and coordinate solutions.

Remember that due diligence is a long process and being prepared for it will speed up the process and reduce many hang-ups. It is important to preserve value and goodwill during due diligence and do your best to maintain your rapport with the buyer. Preparation will ensure that the transaction is more likely to close and the process is as efficient as possible.

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