When it comes to selling a business, many factors influence the outcome. But it all starts with buyer demand and whether your business meets buyer expectations. If you’re considering a sale, it’s important to address several key areas in advance to improve your odds of a successful, higher-value transaction.
Financial Performance
Buyers focus heavily on a business’s cash flow and financial history. Most will request and review the last 3–4 years of business tax returns and financial statements. Is the business growing or declining? Are there volatile swings in performance? Businesses
with stable or upward-trending revenue and cash flow are far more attractive to buyers than those with declining or erratic results.
Financial Statement Quality
It’s not enough to have positive financial results — the quality and consistency of your financial reporting matter. Buyers, along with their accountants and bankers, expect properly prepared financial records that align with standard accounting principles. While QuickBooks is widely accepted, we recommend having your CPA review and clean up your records before listing your business for sale. Ensure tax returns reconcile to the financial statements; discrepancies will quickly draw buyer scrutiny and can complicate or derail a deal.
Customer Concentrations
While longstanding customer relationships may have been a strength for your business, buyers will be concerned about how those relationships will transfer after a sale. If a small number of customers represent a large portion of revenue, buyers will want to understand how those relationships are protected and whether they’re likely to remain intact under new ownership. Addressing customer concentration risks upfront can help ease buyer concerns.
Conclusion
Selling a business is a complex process with many moving parts. Avoiding these common pitfalls can help improve buyer confidence, increase the likelihood of a successful sale, and enhance the overall value of your business. Careful preparation today will help you navigate tomorrow’s transaction with greater ease and success.
