detailed checklist for a business valuation

Here is a detailed checklist for working with business owners during a business valuation, which can also serve as a timeline and roadmap for buyers:

Business Valuation and Sale Process Checklist
Initial Commitment

❏ Be sure the client wants to sell.
❏ Be doubly sure the client wants to sell, emphasizing the need for commitment.
Family and Partner Alignment

❏ Ensure the client’s spouse or partner is on board with selling the business.
Transparency and Time Commitment

❏ Inform the client about the need for full disclosure of business information.
❏ Ensure the client understands the time commitment required for the process.
Professional Engagement

❏ Engage a transactions-based attorney.
❏ Notify and involve the business’s accountant.
Preliminary Information Preparation

❏ Prepare a transaction information fact sheet.
❏ Consider engaging an M&A advisor, investment banker, or business broker.
❏ Have a valuation specialist determine the business value and advising on the asking price and terms.
Tax and Financial Modeling

❏ Have the accountant model the tax methods and consequences of the sale.
❏ Discuss potential buyer interest and financial viability.
Confidentiality and Initial Negotiations

❏ Prepare a confidentiality or nondisclosure agreement (NDA) for prospective buyers.
❏ Obtain a letter of interest from the buyer outlining suggested terms.
Due Diligence Preparation

❏ Assemble necessary information for the buyer’s due diligence.
❏ Provide the buyer with a list of required documents for due diligence.
Letter of Intent (LOI) and Serious Negotiations

❏ Request a thorough letter of intent (LOI) from the buyer.
❏ Have the attorney and accountant review the LOI for legalities and financial implications.
Detailed Transaction Preparation

❏ Identify potential or contingent liabilities.
❏ Prepare detailed descriptions of assets and liabilities.
❏ Discuss employment implications and severance payments with the buyer.
Contract Drafting and Final Negotiations

❏ Start preparing the contract of sale.
❏ Address issues raised during contract drafting.
❏ Define post-closing arrangements and responsibilities.
Final Contract and Closing Preparation

❏ Ensure all necessary professionals review and agree on the contract.
❏ Plan for post-closing adjustments and indemnifications.
❏ Prepare for the winding down and possible liquidation of the entity if selling assets.
Post-Closing Considerations

❏ Plan for post-closing assistance and transition.
❏ Plan and schedule a vacation for the client after the transition period.
Additional Deal Points

❏ Guarantee the net worth of the buyer entity.
❏ Clarify the accounting methods used in financial statements.
❏ Ensure all software licenses are up-to-date.
By following this comprehensive checklist, both sellers and buyers can navigate the business valuation and sale process efficiently, ensuring all necessary steps are taken to achieve a successful transaction.