Crunch aka Closing time – buckle up!
The week immediately before and after a business sale close is full of paperwork, stress, and emotions. Many process questions from sellers and buyers come out of the woodwork; our goal today is to demystify this part of the sale.
If you are wondering when employees should learn about a business sale, review this post before continuing.
Are you an owner / future seller? Check out our 2025 Seller Guide for what to expect
Are you a prospective buyer? Do not miss Straight Talk for Buyers
Working to a Successful Close
Before we can gear up in earnest for a business sale to close, three foundational threads must be complete:
- – Due Diligence
- – Drafting of legal documents
- – Lender ready to fund
Beyond these three items, a net new lease or lease assumption / assignment document must also be available for escrow to review and verify. In the event the seller also owns the commercial real estate that the business operates from, this would simply be included in the drafting of legal documents.
Once the above three items are “flashing green”, we initiate the escrow process to facilitate the legal transfer of the business and the flow of funds.
What does a seller do 1 week before close?
- Keep the business humming! This means:
- – Continue current service jobs / items in production
- – Quotes / estimates continue for new work
- – Scheduling employees, jobs / clients / orders, and vendors
- – Marketing efforts continue
2. Complete as many open jobs / orders / service visits as possible
3. Get invoices out promptly (preferably same day). Do not build up a backlog of work that needs to be invoiced
4. Work to collect open Accounts Receivable
5. Minimize ordering new supplies / equipment
6. Promptly respond to any / all questions from escrow or your M&A Advisor / Business Broker
What to expect in a draft Settlement statement from escrow
While a seller and buyer are completing final paperwork, one of the most important documents they will receive for review is a draft settlement statement from escrow. These naturally look different for seller and buyer.
For a seller, the settlement statement will include the final transaction price, along with any transaction costs or payments that are due at close. If a seller has outstanding vehicle or equipment loans, the payoff amounts will be detailed here. Beyond this, any commercial loans that the seller owes will be due at closing, so expect to see these listed on the settlement statement.
Frequent transaction costs that a seller can expect to see are 1) the success fee payable to our firm and 2) attorney costs.
A seller may see some small amount of a county or city recording tax. They will NOT see any capital gains or income tax on a settlement statement, as these are paid by the owner(s) on their personal filings.
A buyer’s settlement statement will look different. It will include their capital injection (down payment), credit for any earnest money deposit previously made to escrow, and lender contribution of funds. Beyond this, there will be sales tax due on vehicles and equipment, as well as potentially some small amount of a county or city recording tax.
What does a buyer do 1 week before close?
The perspective is quite different for a buyer! One week prior to close, for a buyer, is similar to an expectant parent…there’s a lot of things they COULD be doing. What they need to focus on will depend on the circumstances of the particular buyer.
1. Confirm bank accounts for your new legal entity are ready (assuming an asset sale)
2. Verify you are ready to transfer credit card payments / merchant processing from the seller’s bank to yours
3. Discuss payroll timing with the seller and when this cutoff will be made
4. Review open jobs / orders and any in-flight employee or customer issues
5. Align with the seller on how and when employees will learn that you are the new owner
Closing day and the first 72 hours
Closing day is full of emotion for a seller. Many sellers have spent decades building, growing, and leading their business. They are proud to see the business sale complete, nervous about telling employees and/or customers and likely a bit worn out from the sale process itself. At the same time, they are excited about having more personal time and enjoying the sale proceeds 🙂
For buyers, closing is both a major life milestone and the start of their journey as a business owner.
In the initial 48 hours after a closing, we advise seller and buyer focus on sharing news of the sale with employees and ensuring that communication is respectful, clear, and addresses any questions.
Keep in mind, there is a negotiated transition period included with every business sale (normally 30 – 60 days). Seller and buyer will have lots of time to look at software tools, online marketing, have intro Zooms with key suppliers, etc. Focusing on the employees in the first 2 – 3 days.
72+ hours after close
We recommend seller and buyer take an hour or two to individually write down everything they want to learn / discuss / transfer. Think broadly – business relationships / people, software and payment tools, vendors, customer segments, product categories, competitors, annual / season planning, merchandising lessons learned, context on employees and their strengths / challenges, and on and on. Write down as much as you can think of.
Put both your lists together and make a plan. You have 30 – 60 days that you agreed to, so do not put too much pressure on yourselves in the beginning. Prioritize anything related to people and relationships first.
Beyond these core items, most operational / day-to-day functions can be transitioned as they come up during the normal course of business. Software subscriptions and vendors can easily be updated with new billing info after a transaction has completed.
We have successfully advised dozens of sellers and buyers through the sale process and will of course address any and all unique transition components with your business sale.
As always, thank you for reading.
At Washington Business Brokers we are experts in valuation, optimizing a business for sale, buyer identification and qualification, negotiation, deal structuring, and closing.
If you would like to better understand the value of your business or learn more about the process of confidentially selling:
call or text 206.703.3555
email info@wabusinessbrokers.com
or schedule time for an exploratory, free consult
100% confidential, always.
We proudly represent businesses with revenue of $2M – $30M across many industries. While most businesses are in the Pacific Northwest, we work with owners across the country. Ideal prospective sellers have 10+ full-time employees and $2M+ in sales.
You are an expert on your business.
We are experts on the process of selling a business.
When the time is right for you, we will be proud to partner and advise on your fair deal.
