The Smart Seller’s Guide to Financial Prep Before a Business Sale
From clean books to key metrics, here’s what buyers look for.
Selling your business is a significant financial decision, and proper preparation is key to maximizing value and ensuring a smooth transaction. Buyers, including firms like Promontory Capital Holdings, will conduct thorough due diligence before making an offer. Here’s how to get your finances in order to attract the best deal.
Key Financial Documents Buyers Will Review
Potential buyers will request a comprehensive set of financial documents to assess your business’s value and performance. These typically include:
Profit and Loss Statements (P&L) – At least three years of P&L statements to show revenue trends, profitability, and cost structure.
Balance Sheets – A snapshot of your company’s financial position, including assets, liabilities, and equity.
Tax Returns – Three to five years of business tax returns to verify reported earnings.
Cash Flow Statements – Demonstrating how cash moves through the business and its ability to sustain operations.
Customer and Supplier Contracts – Long-term agreements can add value and provide stability for the buyer.
What Your CPA Should Prepare
A knowledgeable CPA can be instrumental in preparing your business for sale. Key areas to address include:
Normalizing Financials – Adjusting financial statements to reflect the true earnings potential by removing one-time expenses or owner-specific costs.
Identifying Tax Implications – Understanding the tax consequences of a sale and exploring strategies to minimize liabilities.
Ensuring Clean Books – Buyers will scrutinize your accounting records, so having accurate, well-documented financials is essential.
Important Metrics Buyers Consider
EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) – A primary measure of profitability.
Revenue Trends – Consistent or growing revenue makes a business more attractive.
Customer Concentration – A diversified customer base reduces risk for buyers.
Recurring Revenue – Subscription or contract-based income streams can increase valuation.
Take the Next Step
Preparing your business for sale takes time, but doing it right can significantly impact your final sale price. At Promontory Capital Holdings, we specialize in acquiring and scaling small businesses, ensuring a smooth transition for owners looking to exit.
If you're considering selling, let’s talk. Contact us today to explore your options and secure the best outcome for your business.