A Business With Solid Financials Will Sell FAST!

When you go to sell your business, you will find that the buyer is going to ask for some time to do what is called due diligence. Usually they will want 60 to 90 days to look over and scrutinize your business. A major part of that scrutiny will be looking through your financials.

How Solid Are Your Financials?

They are going to ask you questions about things that they see that are inconsistencies. For example, let’s say you normally pay around $4,000 per month for rent. Then they find a month or two where the rent was suddenly $8,000. You can be sure they are going to ask why was the rent double for those two months. Think of those inconsistencies as blemishes.

Your goal before you sell is to remove the blemishes from your financials. The more blemishes you have, the more more nervous your buyer gets. Why is this? Think about it from the buyers point of view. It’s sort of like they are coming in and looking over your laundry, your housekeeping and your habits. Through their purchase they will be inheriting what you have built, including your supplier relationships, your employees, your systems, etc. If it appears that you are not a very good housekeeper it will cause them to begin to wonder and question. The more blemishes, the more wondering and that usually leads to a quick buyer exit. So, what should you do?

Run a tight ship! Clean up your books and consistently keep records. The more sound your bookkeeping and accounting practices the better things will appear and the faster and quicker you will be able to answer questions about the inconsistencies and blemishes that do pop up. Don’t misunderstand it’s OK to have a few blemishes. They are inevitable. However the more important thing is to record properly. Reconcile on a regular basis, keep personal assets separate from company assets, document loans to and from the owners, document liabilities, implement spending controls. These are just a few examples areas that can create blemishes. If you need help, get a good accountant to come in and audit occasionally. They are well-versed in finding and identifying the blemishes.

Even if you are not ready sell today, but you follow the habit of good accounting, you will be more knowledegable about your business. In the long run, that additional knowledge will make you a better business person.