If you’re selling a small business (or a large one), good records are going to be essential to the process. While it may be possible to sell a business with a poor or otherwise incomplete record, it is going to put many buyers off and reduce the pool of organizations you can sell to.

Join us as we review why that is and in what ways you can leverage good records to your advantage.

We Live in a Data-driven World

Whether we like it or not, the world we live in is one of data and its interpretation. The digital age has brought with it computers and types of analysis that can dive far deeper into what is often seemingly disparate information and often pull out useful insights.

While not everyone looking to a buy business will be using the latest tools and analysis methodology, almost everyone wants at least some data before they make a purchase. This is where records come into play.

Records offer buyers a concrete look into your operations. It’s one thing to make claims and quite another to show a large, well-curated pool of information about your company and its history.

This goes beyond what’s needed to prove you’re profitable too, although that’s an excellent start. Being able to show additions, repairs, licenses, when you’ve run events (and how sales were affected during them) all gives a buyer more to work with and more reason to trust you.

As we touched on, almost no buyer will need all those things (although keep track of what the law requires). But the more you have to show, the wider a net you throw during the sales process.

Records Prove Your Value

Perhaps the most obvious way business records benefit them during the selling process is in proving a business’ value. At the end of the day, that’s what most buyers are looking for in their purchases.

Business valuation is a complex topic, as there are a few ways to approach it (with different approaches pulling from different pools of your business’ data). However, all approaches are broadly meant to do the same thing: define in hard numbers what a business is worth.

The good news is most companies should have the necessary information to prove their value, since tracking much of it is required by law. Even where it isn’t, a business should view tracking things like its profits and losses as critical for decision making.

The more you can break down your data, showing the individual pieces that lead to why your business is valued as it is, the better. It helps show potential buyers the specifics of areas they may want to work on or adjust.

If you’re not sure where to start in determining your company’s value, we can help. Records are going to be especially important in proving a business’ utility and its transferability.

A Paper Trail Shows Legitimacy

Another area records help in selling a small business is in their ability to prove legitimacy. It is easy for a business to say whatever will land a sale. It is harder to fake hard numbers, especially fake them well enough to trick financial professionals.

Moreover, things like the opinions of experts on your company’s value and even positive customer feedback can often be verified in ways it would be difficult for you to have any influence over. That means they can further strengthen the argument that you’re a reliable seller.

The buyer persona of those interested in buying a business tends to be one that is (rightfully) worried their purchase is at it appears. To convince someone to spend tens of thousands of dollars, they need to trust you.

In essence, you want to show you’re not a “paper tiger” seller. What you are claiming and what your paper trail shows should align.

It Takes Records to Show Sustainability

Somewhat related to the above, records can prove your business model is sustainable. Buyers often worry your model may only succeed on a risky “Feast or Famine” approach or simply that the market doesn’t support what once worked.

Buying any business feels like a gamble and you need the buyer to feel secure in their purchase. The longer you can prove your business model has sustained itself, the better.

Even better is if you can prove growth, with many buyers even preferring signs of sustained, mild growth to huge spurts of growth followed by leveling off. This shows you’re not only sustainable but have the potential for greater future profit.

If your business model isn’t sustainable, your records can also help you identify where you went wrong. While it’s certainly a harder sale than a sustainable business, being able to show potential buyers where the model can be improved with time and resources holds a lot of value.

The more you can show your business can last through various market conditions, especially those considered detrimental to the industry you operate in, the better.

Want to Sell a Business Faster?

If you want to sell a business, thorough records can get you a sale faster and at a higher price. They help you present a strong case to investors and better convince them you’re a strong purchase.

At Visionary Business Brokerage, we can further help you strengthen your pitch and reach more buyers. If you’re looking to sell a business, contact us and we can discuss how our team can help you!