In my upcoming book, that I will reveal soon, there is a chapter about grooming a business for sale including 5 strategies. The first of these I call: Fixing Your Financials.  Here are the four areas to focus on to cover this strategy.

Provide Three Years of Financials

The financial statements are the first and most important lens buyers use to size up your business. Therefore, it is critical that your numbers are reliable, transparent, and consistent. Reliability means that your income statement, balance sheet, and cash flow statement are accurate and backed up by verifiable data. It is worth investing in an audit with a reputable CPA firm to confirm that your financials are true and fair.

Consistency means that you have prepared multiple years of financials.  be sure to employ the same approach for recognizing revenues and expenses. Companies that reclassify expenses from one year to the next create unnecessary stress for the readers. They erode the confidence of buyers, who will suspect there is something to hide. Especially when you change accounting or enterprise resource planning software, make sure you maintain consistency of records.

From your financials, buyers also draw conclusions about the quality of your management team. Having historically prepared budgets and forecasts with corresponding actual results increases confidence that…