The basics you need to know to prepare your business for sale.

Sloppy Financials Will Kill Your Deal

The first thing buyers want to see is your financials. You’ve got to be able to provide a clean and organized Profit & Loss Statement and Balance Sheet. Heads up, smart buyers look a few years back. When entering into a conversation with a potential buyer, if you come to the table with 3 years of historical financials, including the current year-to-date financials, you are positioning yourself for more value and a higher chance of closing. If you really want to come prepared, use those historical financials and your current operations to prepare a pro-forma showing what you think the business will do in the next 1 to 2 years. Brokers and buyers are going to use your financials to create their opinions and formulate a narrative about where the business has been and what it’s capable of. When you write the story for them with clear financials and a promising pro-forma, you gain leverage in negotiations.

The Profit & Loss Statement (P&L) and Balance Sheet are the foundational reports buyers will use to value your business and decide if they are interested in buying your business. Trust us, they aren’t just looking at the bottom line. Savvy business buyers are looking at everything that contributes to that bottom line; Sales, Cost of Goods Sold, Gross Margin, Overhead & GA, and their relationship to each other gives buyers hints about the current management of the business and opportunities to improve it.

They Will Have Questions

Nothing slows a deal down like the words “Let me get back to you on that”. When buyers examine financials, they ask questions. Knowing your numbers, anticipating those questions, and having answers will mitigate concerns, raise confidence in you and the business, and help the deal move along. Look through your financials and find anomalies that someone else might notice. If your used to an accountant preparing your statements, analyze them, ask questions, do your research. Did your sales drop in Q2 this year? Find out why. Is your marketing spend twice as high as last year? Why? What new strategy were you trying? How did it payoff? Remember, if you don’t write your story, they’ll write it for you. Know your numbers, gain trust, increase leverage, and get more money for your business.

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