To get your books ready to sell, start with three things: make sure your tax returns show the real profit, pull personal expenses out of the business, and fix the small bookkeeping loose ends before a buyer finds them. Think of it the way you would think about selling a house, except the staging happens in your financial records instead of your lobby.
When you sell a house, you paint, you declutter and you fix the leaky faucet before the first showing. Business buyers are every bit as picky. The difference is that they are not walking through your space admiring the paint. They are reading your tax returns, your profit and loss statements and your balance sheet, and that is where the first impression gets made.
Your tax returns need to tell the real story
According to BizBuySell, SBA lenders typically underwrite from tax returns. Most buyers plan to use an SBA loan, so the profit that counts is not the profit you describe in a meeting. It is the profit a lender can see on the return.
If the profit isn't on the return, it is hard to finance. And when a buyer can't finance the price, they either walk away or offer less. That is why the years right before a sale are the wrong time to push taxable profit as low as it can go. Every dollar of profit you minimize on paper is a dollar a buyer's bank can't count.
Personal expenses come out, with paperwork
Plenty of owners run some personal costs through the business. A family phone plan, a vehicle, a trip that was only partly business. Buyers know this happens, and those costs can be added back to show what the business really earns. But BizBuySell's guide is clear that personal expenses only count as add backs if you can document them.
An add back without support is just a claim, and claims are the first thing a buyer's accountant pushes back on. The cleaner path is to stop running personal items through the business well before you sell. For past years, keep the receipts and records that show exactly what each item was and why it won't continue under a new owner.
Fix the leaky faucets before anyone looks
The third step is the small stuff. Bookkeeping that runs months behind. Old receivables that will never be collected but still sit on the balance sheet. A customer or vendor contract that expired years ago and nobody renewed. Each one is a leaky faucet a buyer will find in diligence, and each one makes them wonder what else they haven't found yet.
A practical place to start:
- Close your books every month, on time, so the numbers are current when a buyer asks.
- Review your receivables and clear out balances that are not real.
- Pull every contract the business relies on and confirm it is current and in the right name.
Why a clean business is easier to buy
A clean house shows better, and the same is true for a business. When the numbers tie out, the add backs are documented and the loose ends are handled, a buyer spends diligence confirming what they already believe instead of hunting for problems. That makes it easier for them to say yes, and easier for their lender to say yes too.
Start cleaning up your books before anyone asks to see them. If you want to see where else your business stands, my exit readiness checklist walks through the books, owner dependence and the other things buyers look at.
I am not a CPA or attorney. Review tax and legal decisions with yours.
Ready to talk it through? Talk with me about selling. No cost, no obligation.
Read the transcript
Owners ask me all the time how to get their books ready to sell. I tell them to think about selling a house and treat their business the same way.
When you sell a house, you clean it first. When you sell a business, the cleaning happens in your financial records.
Before a house goes on the market, you paint it, you declutter it, you fix that leaky faucet. Business buyers are going to be just as picky, but they aren't touring your lobby. They're reading your financial statements.
The first thing is making sure your tax returns tell the real story. According to BizBuySell, SBA lenders typically underwrite from tax returns. If that profit isn't on the return, it's going to be hard to finance.
The second is pulling personal expenses out of the business. BizBuySell's guide is clear that personal expenses only count as add backs if you can document them.
The third thing is fixing the small stuff before anyone looks. Think late bookkeeping, old receivables, a contract that expired years ago. Each one is a leaky faucet that a buyer will find.
Just like a house, a clean business shows better, and it's easier to say yes to. Save this and start cleaning up your books before anyone asks to see them.
