If you are interested in selling your business, there are some basic mistakes business sellers make that can absolutely be avoided if you know what they are. Business transactions are inherently complex, so knowing what the most common pitfalls are can help to streamline the process by avoiding them.

Big Mistake #2: Your books and financial records are an absolute mess.

Small business owners sometimes love being their own boss because it means no oversight from management where paperwork is concerned. This might be nice for your stress level, and your system of shoving any business-related material into an ever-growing stack of file boxes in the back room might work for you, but it will become an absolute nightmare when the time comes to sell your business.

Why? No buyer is going to give you a penny for your business if you can’t prove that the business is worth what you are asking. There are a number of ways to determine or evaluate the value of a business, but the most straightforward way is to use current and past financial statements. Any prospective buyer is going to want to see at least the last three years of tax returns and your current P&L’s.

What you will need to do before you list your business is get your financial ducks in a row. You need to find and make legible all of your financial records, make copies of your tax returns, and (if your records really are just a stack of miscellaneous boxes) maybe even hire a business transaction CPA to get the books in order. This may seem like a monumental task, but it will pay off in the end as there will be no ambiguity about what your numbers really are, they will be right there for buyers to see in black and white. It also removes the risk of creating mistrust between you and a serious buyer if what you said the numbers would be and what they figured out the numbers are after slogging through your financials themselves don’t add up.

This mistake is easily avoided by being prepared ahead of time. Ask your broker for help, for a list of what you’ll need, and for the name of a good business transaction CPA if you’ll need one. A note here, you probably should not use your usual CPA that does your tax returns for this project. Only a CPA familiar with the buying and selling of businesses will be able to properly assemble and evaluate your financials for prospective buyers.

Are you a business seller with less than legible financials who wants to know how to get your books organized? Do you have questions about what kinds of documentation you’ll need to have ready? Please leave us a comment or question here, and we will be happy to help you get your business ready to sell.

Want to read Mistake #1: The Cold-Feet Seller? Click here.

Want to read Mistake #3: All-Cash Greed? Click here.

Want to read Mistake #4: Letting Unqualified Buyers in the Door? Click here.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com