It is not unreasonable to expect that anyone with enough money to buy your business is highly experienced and more than a little cynical. They will most likely have some experience in your field of operation and often alot of experience. This will be especially true if you are selling out to a competitor who is buying market share.
The devil is always in the detail so that is where you need to look first. Imagine you are buying a competitor's business with all of your inside market knowledge - what would you want to know?
Make a tough question list that you would ask. If you have a trusted management team - get them involved. What are your worst nightmares? What do really not want to talk about or reveal?
This is a list of things you will need to deal with. Be aware that sales contracts often have clawback terms so that if something bad is discovered after the sale then the buyer may have a claim against you to retrieve their money.
So it is not good enough to cover things up - you will need to correct the problem, or find some form of mitigation when you have to reveal it.
As Donald Rumsfeld famously once said when answering questions about the Iraq war:
'... there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns—the ones we don't know we don't know'
If revealing to a potential buyer that you do not know something about your business is bad, imagine if the sales negotiation brings up something you don't know you don't know.
For example, let's say the potential buyer knows a critical supplier is about to go bust and you don't. Or that a competitor is about to introduce something to the market which will completely change the game and you know nothing about it.
In the buyer's mind the question is:
'why don't you know and is there anything else that both you and I are not aware of?'.
This is why the list of questions that you expect to prepare for has to be extensive.
Selling a business often requires going through a broker or at least advice from a solicitor and your accountant. You will need to take their expert advice and go through the list thoroughly to make sure you have covered all of the known unknowns at least.
External advice should also point you towards the unknown unknowns you need to tackle.
Make sure that everything you find on your investigations is documented in a way that makes it easy to retrieve and refer to. A tabbed file is a simple solution, but an electronic version will also be good if you prefer that, as long as it can be accessed quickly and is secure.
As the saying goes, failing to prepare is preparing to fail. Once into the sales negotiation, a lack of good preparation will mean you will fail to get the best price for your business. Don't take the chance.
