The due diligence stage of the buying process is typically thought of as being the point when the buyer will have complete access to all of the company's books and records.
Before you do this, ensure that you have both agreed to sign a 'Non-Disclosure' (Confidentiality) agreement.
You should essentially treat this stage as the point when you lay all of your cards on the table.
Interestingly, over fifty percent of small business purchases collapse at the due diligence stage and never get to completion.
The most common reason being that the buyer simply cannot gain comfort due to a serious lack of information or insight into the business operations or they have uncovered problems with the business that were not previously disclosed.
Trust plays a huge part in any deal of this nature.
Being poorly prepared or withholding information will be your undoing! It is paramount at this stage to be open about your business to the buyer.
It is completely inappropriate to ponder or negotiate about what information you are or are not prepared to disclose.
If you make this stage completely transparent, the odds of getting a deal will increase dramatically.
For the avoidance of doubt or confusion, have the buyer provide you with a list of all documents they wish to review, and any other aspects of the business they wish to investigate.
If there are any requests on the list that you are not comfortable in providing, you need to provide a valid reason.
As a seller, you need to appreciate that this is the last step for the buyer before considering an offer, and so there may be some requested items that you feel are unacceptable, whereas in the buyers mind, make perfect sense.
If you are expecting someone to part with a sizable amount of money for your business, then the least you can do is offer everything they need in return to make an informed decision.
Place yourself in their shoes.
Refusal will only create distrust.
Items requested that usually raise an eyebrow or two involve a buyers request to speak to employees, customers, or suppliers.
Or have sight of a complete set of customer contracts and client names.
It's perfectly acceptable for you as the seller to be apprehensive about disclosing this.
On the other hand, consider your approach if you were the buyer.
You'll probably come to the conclusion that these requests make sense and have a change of stance.
Whilst some buyers due diligence requests may first seem unacceptable, they ultimately have to be in a position to make an informed decision and close the deal.
Both parties will have to accept certain risks in the deal and if your goal is to sell your business, you need to do everything possible to help get the buyer to feel confident in you and your business.
Honesty and openness usually achieves this in most cases.
Provide them with all documentation that validates what you have presented, and allow them to investigate the various aspects of the business.
They need to be certain your business can be sustained under new ownership so this is the most effective way to get through the due diligence process.