Preparing Your Business for Acquisition or Sale — Financial Readiness Checklist

Introduction
Whether you’re retiring, moving on to a new opportunity, or exploring strategic options, selling your business is one of the most important financial events you’ll face. Buyers don’t buy ideas — they buy predictable cash flows, clean records, and a business that can run without the owner. Preparing your finances ahead of time helps you command a better price, close faster, and reduce the chances of surprises during due diligence.

1. Clean & Accurate Financial Statements (the foundation)

Buyers expect professionally organized financials — generally 3–5 years of income statements, balance sheets, and cash flow statements — plus year-end tax returns and supporting schedules. Have your books reviewed (or compiled/reviewed) by a CPA so numbers are credible and reconciliations are complete. Clear, consistent statements shorten due diligence and increase buyer confidence.

What to prepare:

• Profit & Loss (monthly & annual) for 3–5 years
• Balance sheets and cash flow statements
• Tax returns (last 3 years) and any correspondence with tax authorities
• Accounts receivable / payable aging and general ledger exports

2. Document Recurring & Contracted Revenue

Buyers prize predictable revenue. Clearly document recurring customers, subscription agreements, service contracts, and renewal terms. Highlight long-term contracts and identify any one-off or non-recurring items so buyers can separate recurring cash flow from irregular income.

3. Normalize Owner Compensation & One-Time Items

Closely held businesses often show owner pay, personal expenses, or one-off transactions that distort true earnings. Normalize the income statement by adjusting owner compensation to market rates and removing non-operating or one-time items — this gives buyers a realistic picture of sustainable cash flow and supports valuation.

4. Minimize & Disclose Liabilities (taxes, loans, contingent liabilities)

Unresolved debt, pending lawsuits, and unpaid taxes reduce valuation and slow deals. Identify all liabilities early, pay down where feasible, and prepare explanations or resolutions for any remaining items. If you owe taxes or have disputes, get professional advice and disclose them proactively — buyers will find these in due diligence, and transparency prevents later deal collapse.

5. Document Operations & Key Processes (make the business transferable)

Create or update Standard Operating Procedures (SOPs) for core processes: sales, fulfillment, customer support, vendor onboarding, payroll, and inventory counts. A buyer wants an operation that can run without your daily involvement; detailed SOPs and documented workflows materially improve saleability.

Operational items to gather:

• Employee lists, job descriptions, and payroll records
• Vendor contracts and payment terms
• Customer contracts, pricing schedules, and churn metrics
• Inventory counts and fixed-asset register

6. Legal & Compliance: Clean Title, Licenses & Agreements

Confirm that corporate documents (articles of organization, operating agreement, shareholder agreements), licenses, permits, and IP assignments are current and transferable. If other owners or shareholders exist, review buy-sell provisions and consent requirements early — ownership issues are common deal stoppers.

7. Get a Realistic Valuation & Tax Plan

Obtain a professional valuation to set realistic expectations. Understand the difference between an asset sale and stock sale (or membership interest sale), and model the after-tax proceeds of each scenario. Work with your CPA to plan tax-efficient strategies; timing, allocation, and structure materially affect net proceeds.

8. Prepare a Transition & Buyer Support Plan

Outline a transition timeline and your availability after close (consulting period, training, or phased handover). Buyers favor sellers who commit to a short transition period to ensure continuity. Quantify the support you’ll provide and the expected milestones for knowledge transfer.

Sample Pre-Sale Timeline (12–24 months recommended)

• Months 12–24: Clean up books, standardize processes, and begin documenting SOPs. Start addressing tax, legal, and liability issues.
• Months 6–12: Obtain a valuation, normalize earnings, and resolve major liabilities. Identify and groom internal successors if selling to management.
• Months 3–6: Finalize financials, assemble the data room, and prepare a confidential information memo (CIM).
• 0–3 months: Run buyer diligence, negotiate terms, and plan communications to staff and key stakeholders.

Data Room Checklist (what buyers will request)

• 3–5 years of financial statements and tax returns
• Detailed revenue and customer schedules (top customers by % of revenue)
• Contracts (customers, vendors, leases, loans, NDAs)
• Employee and payroll records, benefits, and HR policies
• IP documentation (trademarks, patents, domain ownership)
• Corporate formation documents and ownership records

(Organize items in a secure virtual data room to speed diligence.)

Quick Seller Tips — Things That Improve Value

• Reduce customer concentration (no single client should represent a disproportionate % of revenue).
• Fix inconsistent or ad-hoc owner pay; show market-based compensation.
• Clean up your chart of accounts and reconcile bank accounts to avoid “noisy” financials.
• Improve recurring revenue mix where possible (subscriptions or service retainers are attractive).

Final Checklist — Ready to Use

• 3–5 years of clean financial statements & tax returns
• Documented recurring revenue and customer contracts
• Normalized earnings (owner compensation adjusted)
• Outstanding liabilities identified and plan to resolve/ disclose
• SOPs and key operational documents organized
• Corporate/legal documents up to date and transferable
• Professional valuation completed and tax strategy reviewed
• Data room prepared and organized for buyer review

Conclusion
Preparing to sell is as much about clarity as it is about performance. Buyers pay for predictability — clean books, repeatable operations, and transparent liabilities. Start early, be methodical, and use advisors to optimize structure and tax outcomes.

Need hands-on help getting sale-ready?
Peak Accounting specializes in preparing small businesses for sale: organizing financials, normalizing earnings, coordinating valuations, and building tidy data rooms that speed diligence and improve offers.
👉 Contact Peak Accounting at www.gopeakaccounting.com to schedule a sale-readiness review and get a practical plan tailored to your business.