How to Make Sure Your Financials Strengthen—Not Stall—Your Exit Strategy

Selling a business isn’t just a financial decision. It’s the culmination of years—sometimes decades—of hard work, sacrifice, and strategic growth. And yet, many business owners don’t fully realize how critical their financial data becomes in the final stretch. A buyer’s offer will depend not just on what your company earns, but on how clearly and confidently you can prove it.

If you’re thinking about selling your business in the next year or even the next few years, it’s never too early to get your financial house in order. The right accounting strategies can help you increase deal value, minimize disruptions during due diligence, and ultimately walk away from the table with a successful outcome.

Below are key questions business owners often search when starting this process—and the strategies that can help you answer them with confidence.

How do I prepare my financial statements for a business sale?

One of the biggest turn-offs for potential buyers is disorganized or unclear financials. If your books are inconsistent or incomplete, expect a lower valuation—or worse, a lost deal.

Here’s how to get your financials sale-ready:

  1. Ensure GAAP compliance. If your business hasn’t been using Generally Accepted Accounting Principles (GAAP), this is the time to start. Buyers expect financials that follow standard rules and can be compared across similar businesses.
  2. Reconcile every account. Go through your balance sheet and income statement line by line. Accounts receivable, accounts payable, inventory, loans—everything should match supporting documentation.
  3. Fix historical inconsistencies. Reclassify expenses, correct errors, and make sure everything is coded the same way month to month. Patterns matter.
  4. Review past three years of financials. Most buyers will request at least three years of financial statements, and they will analyze year-over-year trends. Make sure they tell a clear, consistent story.

This cleanup phase may take time, especially if your accounting system has been more reactive than strategic. But it’s foundational. Bringing in a CPA or outsourced controller during this stage can help accelerate the process.

What is normalized EBITDA and why is it important when selling my business?

Most buyers will base their valuation on a multiple of EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). But what matters even more is your normalized EBITDA—a version that adjusts for non-recurring, owner-specific, or unusual expenses and revenues.

Examples of EBITDA adjustments:

  1. Personal expenses run through the business
  2. Owner salary above market rate
  3. One-time legal or consulting fees
  4. Gain or loss from the sale of a major asset
  5. Unusual vendor or customer settlements

The goal is to present a clean picture of the company’s ongoing earnings potential—what the buyer can reasonably expect to earn once the transition is complete. Documenting and justifying these adjustments is critical. A well-supported normalized EBITDA gives buyers confidence—and gives you leverage.

How do I calculate and negotiate working capital in a business sale?

Working capital is often a surprise factor in deal negotiations. It refers to the short-term assets and liabilities needed to keep the business running day-to-day—things like cash, receivables, payables, and inventory.

In many deals, a “working capital peg” is established—essentially a target amount of working capital that must be delivered at closing. If your business delivers less, the purchase price is reduced.

To prepare:

  1. Analyze your average monthly working capital over the past 12–24 months
  2. Understand seasonal fluctuations that might affect timing
  3. Benchmark against peers or industry standards
  4. Prepare a detailed schedule of current assets and liabilities

The more prepared you are with clean numbers and historical context, the less likely it is that this becomes a point of contention later in the deal.

Should I invest in a Quality of Earnings (QoE) report before selling my business?

If your buyer is a private equity group, strategic acquirer, or sophisticated investor, they will almost certainly request a Quality of Earnings (QoE) report. This analysis digs into the financial data to verify that earnings are sustainable and free from anomalies.

Instead of waiting for the buyer to do it, many sellers now commission their own QoE report in advance—called a sell-side QoE.

Why it’s worth it:

  1. You find and fix issues early
  2. You speed up the due diligence timeline
  3. You control the narrative and support your valuation
  4. You gain a tool to use in negotiations

While this may cost between $25,000 and $75,000 depending on your size and complexity, it can save exponentially more in deal value preservation.

What financial red flags scare off buyers?

Even businesses with strong fundamentals can turn off buyers with hidden financial issues. These red flags can slow down—or stop—a sale.

Common deal-breakers include:

  1. Inconsistent revenue recognition
  2. Customer concentration (e.g., one client makes up 40% of sales)
  3. Unexplained margin compression
  4. Excessive or poorly documented add-backs
  5. Large discrepancies between tax returns and financial statements
  6. Manual accounting processes with little audit trail

The earlier you can identify and address these, the stronger your position will be during negotiation. Don’t wait for a buyer to uncover them.

What role does my accounting system play in the sale process?

Your accounting system doesn’t just support operations—it reflects your professionalism and scalability. Buyers may be wary of a business that relies heavily on spreadsheets, manual reconciliations, or legacy software.

If your system shows signs of age, now is the time to modernize.

Consider upgrading to a cloud-based system with real-time reporting, automated bank feeds, and user access controls. Not only does this help with valuation, but it also makes due diligence faster and less painful. Ideally, you should be able to pull detailed reports and transaction history with just a few clicks.

When should I start preparing my financials if I want to sell my business?

Ideally, you should start at least 12 to 24 months before you plan to sell. That gives you time to clean up your books, implement improvements and build a track record that supports your valuation goals.

But even if your timeline is shorter, don’t panic. Start by working with a CPA firm that has M&A experience. They can help you:

  1. Prioritize financial improvements
  2. Develop an adjusted EBITDA schedule
  3. Prepare documentation for due diligence
  4. Evaluate tax implications of the sale structure

This level of preparation helps you stay in control and avoid leaving money on the table.

What should I ask my CPA or financial advisor before selling?

If you’re engaging outside help, ask your CPA:

  1. Can you help me prepare a normalized EBITDA schedule?
  2. What are the tax implications of different deal structures (asset vs. stock)?
  3. Do I need a sell-side QoE report?
  4. How do I structure the deal to optimize my after-tax proceeds?
  5. What industry-specific benchmarks should I know before negotiations?

The right advisors won’t just help with compliance—they’ll help you see your business the way a buyer does.

Final Thoughts: A Strong Exit Starts With Strong Financials

Selling your business is more than signing a contract—it’s telling the story of your company’s value. That story is told in numbers. When your financials are clear, consistent and credible, buyers take you seriously. When they’re not, your valuation suffers—or worse, your deal collapses.

Investing in financial readiness doesn’t just prepare you for a sale. It shows buyers that your business is built to last—even when you’re ready to move on.

Looking for help getting your business financially ready for sale?

Reach out to a trusted advisor who specializes in M&A accounting. With the right strategies, you’ll not only protect your deal—you’ll maximize it.