Preparing Your Financials to Maximize Sale Price

When it comes time to sell your business, there’s one thing that can make or break your deal: your financials. Buyers, lenders, and advisors don’t just want to see numbers, they want to trust them. And here’s the truth: the less clean your financials are, the less confidence buyers will have, and the less they’ll be willing to pay.

Think of it like selling your house. You wouldn’t invite buyers over with dishes piled in the sink and socks on the floor. The same goes for your financials. If they’re messy, buyers assume the worst—and they’ll make you pay for it in the purchase price.

Clean, Accurate Financials = Buyer Confidence

Make sure your books are up to date. No missing months, no “I’ll get back to you on that” when someone asks for your P&L. Keep income and expenses categorized consistently, and avoid commingling personal and business finances.

Buyers aren’t looking for perfection; they’re looking for confidence. Clean numbers say, “This business runs smoothly.” Sloppy numbers say, “Proceed with caution.”

Update Records and Documentation

Buyers want to see tax returns, profit & loss statements, and balance sheets that line up. If your tax return says one thing and your internal report says another, guess who wins? The IRS. And your buyer will doubt every other number you hand over.

Supporting documents, like invoices and contracts, should be organized. Disorganized records lead to drawn-out due diligence, lower offers, or no offers at all.

Normalizing Earnings: SDE, EBITDA, and Add-backs

Here’s where it gets real. Clean financials feed into one of two valuation metrics:

• SDE (Seller’s Discretionary Earnings) for small businesses, showing the total benefit to the owner.
• EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) for larger companies, reflecting performance independent of the owner.

These numbers are the backbone of your valuation. Buyers pay multiples of them. Every dollar you can prove in SDE or EBITDA matters.

And let’s be honest, every owner runs some personal expenses through the business. The golf membership. The “business trip” that looks suspiciously like a family vacation. The cell phone plan that covers everyone in the household, including the dog.

If you want credit for these add-backs, you must track and separate them cleanly. If you wave your hand and say, “Oh yeah, I run about $50K through the business,” don’t expect a buyer to believe you. If it can’t be proven, it doesn’t count—and that could mean tens of thousands off your sale price.

Cautionary Tale: One seller we worked with claimed $60,000 in add-backs—but all of it was lumped into a single “miscellaneous” account. No receipts, no notes, no detail. Buyers wouldn’t accept it. At a 3x multiple, that sloppy record-keeping cost him $180,000 off his sale price.

Positive Example: Another owner tracked every add-back with clear notes in QuickBooks. Her CPA prepared a schedule of adjustments with backup documentation. Buyers didn’t push back once, and she captured every dollar in her SDE, adding nearly $250,000 in value to her sale.

Show Growth and Trends

Beyond clean numbers, buyers love a growth story. Year-over-year increases, stable margins, and resilience during tough times all inspire confidence. KPIs like customer retention or revenue per employee help justify higher multiples.

Think of clean financials as the foundation, and growth trends as the curb appeal. You need both.

Work With Professionals

A CPA adds credibility. A business broker or M&A advisor ensures your SDE or EBITDA is presented correctly and defended during negotiations. Don’t try to wing it—this is likely the biggest financial event of your life.

Preparing your financials isn’t just about neat books, it’s about maximizing value. The less clean your financials, the less confidence buyers will have, and the more they’ll discount your price.

Every owner has personal expenses. That’s normal. But if you want full credit, keep them documented and easy to add back. Clean financials and organized records don’t just make the process smoother, they put you in control and maximize your sale price.

At the end of the day, clean financials are like good manners: they don’t cost much, but they go a long way.

Ready to put your business in its best light?

Contact EDGE Business Advisors for a financial readiness consultation before you list.