BreakThru Realty

How to Prepare Your Financial Statements to Sell a Business

A buyer pays for earnings they can verify, and a buyer's lender finances only what it can trace from the tax returns to the bank. Preparing the financial statements before you list is the single most reliable way to hold your price through due diligence.

Storefronts and parked cars along a small town main street at sunset

Reviewed by Tyson E. Sam, Founder and Broker of Record, BreakThru Realty, Florida License 3565210

Find Out What My Business Is Worth · (786) 914-1017

Three Years, Reconciled

Gather three years of business tax returns, profit and loss statements and balance sheets, plus the current year to date. The totals should reconcile: sales on the returns should match the profit and loss statements, and both should be supported by bank and merchant-processing deposits. Differences are normal and explainable; unexplained differences cost more of the price than anything else.

Recast the Numbers

Recasting turns the tax-minimising statements an owner files into the earnings a buyer will receive. List every add back line by line, such as your salary, your personal vehicle and phone, family members on payroll who will not stay, one time repairs and legal costs, with the receipts or statements that prove each. An add back without evidence is usually disallowed by the buyer's lender.

Cash and Unreported Income

Income that never reached the tax return cannot be verified, and a lender will not count it, however real it is. Owners who plan to sell in a year or two are better served by reporting everything now, so the returns show what the business actually earns. Your accountant should advise on the right way to do that.

The Balance Sheet and What Transfers

Most small business sales are asset sales: the buyer acquires the equipment, inventory, name, phone numbers, website and goodwill, while the seller keeps the cash and pays off the debts at closing. Inventory is usually counted just before closing and added to the price at cost. Know what you owe, what liens are recorded against the business and what will be paid off from the proceeds.

Sales Tax, Payroll and Licences

Florida buyers ask for proof that sales tax and payroll taxes are filed and paid, because unpaid state taxes can follow the business to its new owner. Keep the filings current and the confirmations on hand, and gather the licences, permits and inspection reports the business operates under. Your accountant and attorney should confirm what your sale requires.

Monthly Detail and a Quality of Earnings Review

Buyers look at the trailing twelve months by month, to see seasonality and the direction of the business, so monthly statements matter as much as annual ones. For larger sales, a buyer or lender may commission a quality of earnings review from an accounting firm; sellers who expect one sometimes commission their own first, so there are no surprises.

Find Out What My Business Is Worth

Tell us the type of business, the city, how long it has operated, annual revenue, owner benefit or seller's discretionary earnings, EBITDA if you track it, monthly rent and lease expiry, number of employees, how involved you are, why you are selling, your timeline and whether you would consider seller financing. A licensed BreakThru business broker prepares a confidential valuation from comparable sales and replies within one business day. Everything you tell us is confidential, the valuation is free, and nothing is listed or announced unless you decide to sell. Prefer to talk now? Call (786) 914-1017.

Questions Owners Ask

How much is my business worth?
Most owner operated businesses in Florida sell for a multiple of seller's discretionary earnings: net profit plus the owner's salary, benefits and one time or personal expenses run through the business. Where the multiple falls depends on the industry, the lease, the staff, the trend in the numbers and how much the business depends on you. A confidential valuation gives you the range for your business and the reasons behind it.
Will my employees, customers or landlord find out?
Not from us. The business is marketed without its name or address, buyers sign a nondisclosure agreement and prove their funds before they learn who you are, and showings happen after hours or are presented as something else. The landlord is approached only once there is an accepted offer, because the lease has to be assigned.
How long does it take to sell a business?
Six to nine months from listing to closing is common for a well prepared small business, faster when the price is right and the records are clean, longer for businesses that need a licensed buyer or a franchisor's approval. The escrow period after an accepted offer is usually sixty to ninety days.

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