Financials Records – How To Maintain Them

There are a variety of items that impact the sale of a business including the valuation of the business.  Financials records being one of the most important one.  Let’s take a look on how to best maintain them.


Hi, my name is Sundeep Gill from GillAgency and today we will discuss the importance of maintaining the financial records to ensure that you are on the path to successfully sell your business.

Financials are the root of all M&A transactions, pretty much. The buyers will heavily depend on them and rely upon them in order to move forward with the transaction. So let’s get into it.

You want to keep your financial records as simple as possible. If you have 2 or more corporate entities for the same business, we would advise to consolidate them into one as there may be some overlap in expenses, revenue, shared staffing and it would be difficult for a buyer to believe the overlap and will end up discounting the valuation.

Keep your personal expenses out of the business financials as much as possible.  Now we know that everyone does it, but try to refrain from it as you dress your business to sell.  Buyers can be cautious if they see a lot of addbacks that are personal and may doubt the validity of these personal expenses.

On the other hand SBA lenders may not take all of the addbacks into consideration, which will reduce the funding approved for the business.

Do not take distributions as it can’t be added back to get to the real adjusted EBITDA or cashflow.  Take a salary on a W2 so it shows up on your profit and loss statements.  Do not give your family and friends a no show job, because that can’t be proven to the buyers.

Watch the financials very carefully when you are in the marketplace for any fluctuation in expenses.  Yes you have to run a successful business and there will be capital needed to expand.  Just weigh out those options and evaluate how that will impact the bottom line.

The realization of higher gains in the future by investing now, may not sit very well with a buyer when they are evaluating the current state of the business.  Remember the buyer is buying the current state and not necessarily the future (to an extent)


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