How to Prepare Your Financials Before Selling Your Business

Selling your business is a major milestone — and the way you present your financials can make or break the deal.

Buyers want clean, accurate, and well-documented financials. They’re not just numbers — they’re proof of your business’s value and future potential.

Preparing your financials ahead of time can:

✅ Increase your sale price
✅ Streamline due diligence
✅ Make your business more attractive to buyers

Here’s your step-by-step guide to getting your financials sale-ready:

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Clean Up Your Financial Statements

Buyers expect professional, organized financial statements. Make sure you have:

📊 Profit & Loss (Income Statement) for the last 3 years
📑 Balance Sheet
💵 Cash Flow Statement
📈 Trailing 12-month (T12) financials
📅 Year-to-date (YTD) financials

Consistency and adherence to standard accounting principles (GAAP, if possible) is critical. Clean statements build trust and speed up the sale process.

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Separate Personal and Business Expenses

Many small business owners mix personal and business expenses. Before selling:

🚫 Remove non-business expenses from your books
📝 Document “add-backs” for discretionary or one-time expenses (owner perks, unusual repairs, etc.)

This step can significantly improve EBITDA — the number most buyers focus on — and increase your valuation.

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Normalize Your Financials

Normalization gives buyers a realistic picture of your earning potential.

Adjust your financials for:

🔄 One-time or extraordinary expenses
💼 Owner salary adjustments to market rates
🧾 Non-recurring contractor fees
📉 Revenue spikes or temporary dips

A clearly presented Normalized EBITDA often drives your selling price more than raw profit numbers.

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Resolve Outstanding Financial Issues

Before going to market, address potential red flags:

💰 Collect overdue accounts receivable
📦 Clear obsolete inventory
🤝 Resolve vendor disputes
📌 Record all liabilities accurately

Buyers will notice these during due diligence—handling them early can prevent delays
or reduced offers.

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Tighten Bookkeeping & Accounting Processes

Reliable numbers increase buyer confidence. Strengthen your accounting by:

👨‍💼 Hiring a CPA to review statements
🔍 Reconciling bank statements (last 12–36 months)
💻 Migrating to modern accounting software (QuickBooks, Xero, etc.)
📋 Documenting financial controls and reporting processes

Strong controls signal a well-managed, lower-risk business.

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Ensure Tax Records Are Accurate

Buyers and lenders will compare financials to tax returns. Make sure:

📄 Tax returns for the last 3 years match your books
🗂️ Any discrepancies are documented
✔️ Payroll and sales tax filings are current

Consistent tax records accelerate buyer approval and financing.

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Create a Comprehensive Financial Data Room

A well-organized data room demonstrates professionalism and speeds up due diligence.

Include:

📊 3 years of financial statements
📑 3 years of tax returns
📈 T12 and YTD financials
💳 Accounts receivable/payable reports
📦 Inventory, payroll, and capex reports
📋 Debt schedules and add-back schedules
🔮 Forecasts or projections (Optional but recommended)

Transparency increases buyer confidence and can justify a higher asking price.

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Prepare Financial Projections

Even simple, conservative forecasts help buyers understand future potential.

Include:

📅 Revenue and expense projections (12–36 months)
📌 Assumptions behind growth forecasts
🤝 Customer pipeline or backlog information

While projections are estimates, they shape buyer expectations and often influence deal
multiples.

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Work With a CPA or Advisor

A professional can help you:

💡 Identify value-boosting add-backs
🧹 Clean up your books
🚨 Reduce due diligence red flags
📊 Optimize tax and reporting strategies

This investment often pays for itself through a higher sale price and smoother transaction.

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Reduce Risk & Increase Predictability

Stable businesses attract premium offers.

Improve perceived stability by:

👥 Diversifying your customer base
📝 Renewing key contracts
🔁 Building recurring revenue streams
📚 Documenting processes to reduce owner dependency

Buyers are willing to pay more for a business that can run without constant owner
intervention.

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Bottom Line

Preparing your financials is more than bookkeeping — it’s strategic positioning.

Clean, normalized, and well-documented financials help buyers:

✅ See the true value of your business
✅ Move smoothly through due diligence
✅ Make stronger offers

Start early. Work with professionals. Treat your financials as a powerful marketing tool.

A little preparation today can lead to a smoother — and more profitable — sale tomorrow.

CBA Group is ready to guide you through every stage of the sale process — with a dedicated team of experienced specialists committed to maximizing your business value. Contact us today to start the conversation.