Exit · 2 min read ·
Selling in three years? Start on the books now
Buyers pay for numbers they can trust. The cleanup takes longer than owners expect.
Owners tend to think about selling in the last six months. Buyers think about the last three years. That is the gap this article is about. Whatever a buyer will pay, they will pay it for numbers they believe, and belief is built over time.
What a buyer actually looks at
Three years of financial statements that tie to the tax returns. Revenue by customer, so they can see you are not dependent on one account. Gross margin that holds steady or improves. Payroll that is on the books, with the owner paid a market wage rather than living out of the business. Clean receivables. A lease or contracts that transfer.
Every one of those is either true today or takes time to make true. None of them can be fixed in the month before a sale.
Why the cleanup takes longer than you think
Personal expenses running through the business, cash sales that never made it into the books, owner loans that were never documented, inventory that was never counted. Each is normal in an owner-run company. Each one lowers what a buyer will pay, or makes their lender walk, because they cannot tell what is real.
Rebuilding a year of books for a client took months of work before the numbers could be trusted. Now imagine three years, with a buyer waiting.
What to do this year
Pay yourself a real salary and stop running personal costs through the company. Close the books every month, not every April. Get a simple report of sales by customer and by service line. Document any money the business owes you or you owe it. Ask your CPA what the entity structure means for a sale, because changing it later can take years to pay off.
One of our long-term clients took a partnership in a larger business, and we ran the financial side for about five years. When they sold, the numbers were already the kind a buyer could trust, because they had been kept that way every month, not prepared for the occasion.
What to do with this
- Buyers price three years of numbers, not the last six months.
- Take a market salary and get personal costs out of the business now.
- Close the books monthly and know your sales by customer.
- Talk to your CPA about entity structure early. It takes years to matter.
Questions this answers
Three years is a realistic runway. Buyers and their lenders look at three years of statements, so the clean-up needs to be showing in the numbers well before you list.
Numbers that do not tie to the tax returns, personal expenses in the business, dependence on one customer, an owner who is underpaid on paper, and books that are only closed once a year.
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