Why Having a Clean Financials helps You Sell

1. Financials Tell Your Business Story

• Your P&L, balance sheet, and cash flow statements aren’t just numbers — they show how your business makes money, spends money, and grows.

• Buyers use them to evaluate risk, forecast returns, and understand operations without needing to read between the lines.

Think of your financials as the résumé of your company. The cleaner and more compelling it is, the more confidence you inspire.

2. Valuation Is Based on Financials

• Most buyers (especially PE and strategic) use EBITDA multiples to determine value.

• If your financials are messy, full of personal expenses, or inaccurate, buyers can’t trust your numbers, which:

  • Lowers your valuation

  • Results in discounts or “haircuts”

  • Slows or kills deals

3. Due Diligence Will Uncover Issues

• All serious buyers conduct financial due diligence (a deep audit-style review).

• If they find inconsistencies, hidden liabilities, or unclear records:

  • It raises red flags 🚩

  • Leads to re-trading (buyers lower their offer)

  • May cause buyers to walk away

4. Reduces Risk for the Buyer

• Clean financials show that your business is professionally run and stable.

• For PE buyers, it helps secure financing (debt lenders care about clean books).

• For strategic buyers, it ensures your business can be integrated cleanly.

• For individual buyers, it builds trust and confidence that they can step in and operate it.

5. Makes You Look Like a “Ready to Sell” Business

• Buyers love companies that act like they’re already PE-owned:

  • Consistent reporting

  • Clear KPIs

  • Real-time dashboards

  • Logical chart of accounts

BONUS: Good Financials = Flexibility

With solid books, you can:

• Tell a growth story

• Justify add-backs to increase EBITDA

• Command a higher multiple

• Negotiate from a position of strength

Key Actions to Prepare

• Get reviewed or audited financials (or at least CPA-prepared)

• Build a 12–24 month forecast

• Track and normalize EBITDA

• Separate personal expenses from business ops

• Use a consistent chart of accounts and accounting method

Financial prep Checklist before Selling

Financial Due Diligence Checklist for selling a business: Financial Prep Checklist

I’ll now lay out the checklist items for you to plug right into this design:

Financial Due Diligence Checklist for Selling Your Business

Accounting & Financials

• 3 years of P&L statements (monthly + annual)

• 3 years of balance sheets

• 3 years of cash flow statements

• Year-to-date financials

• Budget vs. actuals

• Financials prepared or reviewed by CPA

• Clean chart of accounts (no commingled personal expenses)

EBITDA & Add-Backs

• Normalized EBITDA calculations

• Add-back schedule (one-time expenses, personal perks, non-recurring costs)

• Reconciliation of net income to EBITDA

Taxes

• Federal & state income tax returns (last 3 years)

• Sales tax filings

• Payroll tax records and compliance

Revenue & Contracts

• Revenue breakdown by customer/product/channel

• Customer concentration report

• Copies of key customer contracts (assignable)

• Details on pricing models and recurring revenue

Payroll & Employees

• Payroll reports (past 12 months)

• Employee roster with salaries, roles, tenure

• Benefit programs, retirement plans, and policies

Debt & Liabilities

• Business loan agreements

• Credit lines and balances

• Accounts payable aging report

• Leases and other liabilities