Tip #54: Does The Business Look Good on Paper?

Cartoon explaining cash flowWhether you’re selling your business in 12 years or 12 months, it’s important to be able to show your company’s worth on paper.

Having thorough financial records is a key to making a sale. Qualified buyers are going to want to do their due diligence before they make a purchase, and that means they will want to see a solid cash flow.

Even if selling is far from your mind, at least once every year you should review the following:

  • Any additional documentation to substantiate financial representations
  • 2-3 years of profit & loss statements
  • Cash flow statement
  • Current balance sheet
  • 2-3 years of business tax returns

Learn more about business financials and what they should look like.

More often, you should monitor these documents:

  • Current lease
  • Revenue breakdown that will help potential buyers understand the revenue more clearly. It should state which revenue is recurring, which revenue is from long term clients, and which revenue is from new clients.
  • Employment agreements
  • Contracts that exist between suppliers and clients. While you’re at it, make sure these contracts are tied to the business itself, instead of to you, the business owner.
  • Insurance policies

As you compile or review your documents, you should:

  1. Make Sure Your Financials are Accurate: Not only are inaccurate financial forms not helpful, they can harm your credibility.
  2. Consider Ways to Improve Business Strategy: Looking over your financial documents is a great time to identify where your business could use improvement.
  3. Talk to a Broker: It’s never too early to start building a relationship with a business broker. They will help you with your record keeping if you need any improvements and help identify areas where your business can be adjusted. That way, when you are ready to sell your business, you’ll be able to get the right buyers.

Being a business owner is a busy job, so it’s a good idea to keep your focus there. Hiring a business broker helps to make that possible. To get started with The Bridlebrook Group, call 610.325.7066 or contact us online.