Preparing Financials Before Listing Your Business
Selling your business is a big step, and having clean, well-organized financials can make it a lot easier. Up-to-date records show buyers that your business is reliable and transparent, and this builds trust from the start.
Disorganized or incomplete records, by contrast, can raise red flags. Buyers may hesitate or back out if they see signs of disorganization. Taking the time now to sort your books can help ease the sale process and allow you to command a higher price.
Gathering Essential Financial Documents
Before listing your business, gather all core financial documents for the past few years. Key items include:
Income statements
Balance sheets
Federal tax returns
Cash flow statements
Year-to-date (YTD) financials
Recent bank statements
Having these ready in one place is critical. For instance, business brokers often use your P&L, tax returns, and other financials to estimate your business’s value and set the right asking price. At the same time, serious buyers and lenders typically also review these documents closely during due diligence.
Sharing complete, accurate records up front helps move the sale along faster and builds confidence in your business.
Ensuring Clean Books and Third-Party Verification
Once you have all the data, make sure your books are clean, reconciled, and up to date. Well-kept books that follow standard accounting rules (like GAAP) show buyers that your business is well-run and trustworthy.
If your accounting has been a little informal, such as relying only on cash-based records or missing some details, now’s the time to fix it.
It also helps to bring in a third party, like an accountant, to review your financials before you sell your business. Buyers put more trust in numbers that have been reviewed or verified by an outside expert. In many cases, a formal review (or even a basic audit) can greatly enhance credibility.
Identifying and Removing One-Time Expenses
As you tidy your books, look for expenses or revenue that won’t recur under new ownership.
Examples include:
Legal fees from a one-time lawsuit
Costs from relocating your office
A large bonus paid to yourself in a single year
By removing these one-time items, you can give buyers a clearer picture of what the business typically earns, making your company more attractive and easier to value.
Working With Advisors and Business Brokers
A trusted financial advisor, CPA, or business broker can help you understand your numbers and present them clearly to buyers. These professionals know exactly what buyers want to see.
For instance, business brokers can:
Collect your tax returns and income statements
Prepare a market-value analysis (MVA) to back up your asking price
Organize your financial documents for due diligence
Such experienced experts can save time, avoid costly mistakes, and give buyers the confidence they need to move forward.
Sell Your Business With Confidence by Planning Ahead
When your records are complete and any unusual items have already been explained, buyers spend less time asking questions and more time moving forward. Instead of uncovering problems, they’ll see proof of healthy cash flow and solid performance.
The effort will pay off when you can point to accurate numbers that support your asking price and sail through due diligence. With your finances in order, you’ll present a professional, trustworthy picture that makes selling your business a smoother, more rewarding process.