Five More Items for Your Business Closing Checklist

Now if we are telling you there are five more items for your business closing checklist, you’ll probably want the first five, which you can find here. As with that list, this list is full of items that are logical, but don’t occur to most first-time sellers, so don’t feel bad for not knowing them.

Inventory

If you do have inventory that is included in the purchase, you will likely already have drawn this up and had it properly valued. That’s not what we’re referring to here. We’re talking about an “annotated” inventory list.

For example, if there’s a particular product that you’ve been using but know there are different/more expensive/less expensive versions, you might want to share that information. If there’s a vendor you like to buy these parts from (or one that you couldn’t be paid to do business with) you should list them and give reasons.

One time we shared the possibility of doing this with a seller and his response was, “I’m not going to do that.” We were a bit stunned, given how long he had taken to build this company and how much this little bit of effort would help the new owner in a little way. Instead, the seller decided to take the low, entitled road, drawing a line on what he would be “willing to do” instead of setting up the future owner for success, which is a reasonable expectation of anyone passing on his life’s work.

Working Capital

It’s true that on the day of closing, you’re going to have purchases and payments going into your bank account as the new owner. But you’re also going to have bills and purchases due, with money coming out. That means you’re going to need some working capital in the business.

This is going to vary significantly on the type of business you’re buying, but the very best person to ask is going to be the seller. If, for whatever reason the seller isn’t helping you here (see the “I’m not going to do that” example above) you could ask for a monthly statement of the business bank account to see what amounts are coming out when. If you don’t get that either, then consult with your broker and put in your best guess.

You need working capital on day one, but you’ll need to line it up before then.

SWOT

It’s very likely that your broker will have helped develop a SWOT analysis as part of the sale process. The Strengths and Weaknesses are less important as you move towards closing; it’s the Opportunities and Threats part of the analysis you should be focusing on.

If the seller is willing to meet with you, a focused discussion built around, “What would be the 1-2 opportunities you would pursue if you were me, given sufficient time, energy, and resources?” The other matching question would be “What are the 1-2 biggest threats I should be aware of?” Again, this will likely have been gone over during the sale process, but this is your chance to go deeper with the seller as you move towards the close of the transaction.

Family Commitments

Believe it or not, we once had a deal fall through because a spouse threatened a divorce if the deal went through. The buyer had not done the necessary work to get her onboard. This may not have been about the business at all, but it sure identified problems at home!

While you may be the sole person funding/guaranteeing/paying for the business, no one ever builds a business by himself/herself. Make sure that your family is fully onboard with what you have planned and that you’ve done a realistic assessment of what your new life will look like. Their buy-in isn’t necessary for your success, but it can really make a difference when the going gets tough.

Licenses

We’ve shared before that deals were sometimes jeopardized because a license could not be transferred to a buyer and/or one can take a while to obtain.

Never assume that a license can simply be transferred, either to your business or to you personally. Assuming the opposite means that you will highlight this early on in your diligence process and not get burned weeks or days from closing.

Trust us, our closing checklist is a lot longer than one or even two articles with five items each. Call us today to get a list of what you should be doing as you move towards the close of a business transaction.