Deals rarely die on weaknesses. They die on surprises. A problem you disclose on day one gets priced into the offer and forgotten. The same problem discovered by the buyer in week seven becomes a reason to reprice everything, because now the question is not the problem, it is what else you did not mention. The document list below is how you make sure everything is a disclosure and nothing is a discovery.
| What they ask for | What it proves |
|---|---|
| Three years of profit-and-loss statements and balance sheets | The shape and direction of the earnings. Three years, because one good year proves a good year, not a good business. |
| Three years of business tax returns | That the books are real. Buyers read returns against the P&L line by line; this is the credibility test the rest of the deal leans on. |
| Revenue by customer | Concentration. If three accounts are half the revenue, the buyer will find out, so the only question is whether they hear it from you with a plan attached. |
| Customer contracts and service agreements | The recurring base: what is contracted, at what price, renewing when. In a licensed trade this stack is most of what the multiple stands on. |
| Licenses and permits, and who holds them | That the business can legally operate on day one after closing, and what happens if a license lives in your name rather than the company's. |
| Payroll, roles, and any employment agreements | Who runs what, what they cost, and who might leave. Key people under agreement are an asset; key people on a handshake are a diligence question. |
| The premises lease, or the deed | Whether the buyer can stay put and at what cost. A lease with two years left and no renewal option is a problem better solved before going to market. |
| Equipment and vehicle list, with what is owned versus financed | What actually transfers, and what debt rides along with it. |
| Insurance policies and claims history | The risk record, and whether the operation is insurable at a normal price by its next owner. |
The tax return test
Of everything on the list, the returns matter most, for one reason: they are the only documents in the stack you prepared for an audience you could not impress. When the P&L and the returns tell the same story, every other claim you make gets easier to believe. When they diverge, every number in the deal is now suspect, including the true ones.
Which is also the candid answer to a question owners sometimes raise privately: unreported cash is not sellable earnings. You cannot be paid twice for the same dollar, once by not reporting it and once by selling it at a multiple. Buyers price what can be proven, and the time to start proving earnings is a couple of years before you want credit for them.
When to start
Before going to market, not after signing a letter of intent. Under an LOI you are on the buyer’s clock, inside an exclusivity window, assembling documents at the worst possible moment and being read as disorganized while you do it. The same stack assembled early reads as a business that runs properly, because that is what it is evidence of.
Where this fits: the preparation step, before anyone is approached. Next in the series: how to read the offer when it comes.