Record Keeping Before Selling My Company

They say hindsight is 20/20.  Well, when it came to selling my company, it was certainly true.  There are a few things I wish I had known even before I decided to sell my company, that’s for sure.

I wish I had known that the buyer’s financial team were going to dig that deep into my financial records and statements.  It’s not that I had anything to hide, it was just a messy and embarrassing.  From different employee methods of handling records to my one vacation in fifteen years run through the company left many things needing “explanations” and it left me looking “shady” if you will when the opposite is true.  I shouldn’t have been so lazy about my records.  If I had them in tip top shape, I could have gotten a more “tip top” dollar.

If you are an employer that has had the same bookkeeper or financial team since the beginning and they have done their job impeccably, you’re one of the fortunate ones.  Over the last 10 years while their hasn’t been a whole lot of turnover in my company, I have had different ones that used different methods for filing and labeling.  In the initial phase of due diligence to put together a financial overview of my company, I found that there were many items that needed some sort of “explanation” of sorts.  Why was this classified as this and why did that get put as reimbursable expense?  There were thousands, yes, literally, thousands of questions that were hard to get answered simply because my financial record team were not consistent and thoroughly detailed.  Trust me when I say that buyers do not like it when you have to “explain” every little thing that comes up.

I took the first vacation I’ve had in fifteen years a couple of years ago.  I made the mistake of running all those expenses through my company rather than just taking it out of my own personal bank account.  BIG mistake.  It would have been best if I just used my own personal money and kept my vacation out of my company financials altogether.  Even though it was a completely legit vacation, it left the buyers with an “off” impression of me, looking for other types of “perks” in the records.  I’m no money launderer but the buyers scanned all of the records looking for any hint that I might be – or at least it felt that way.

The bottom line?  Start examining your financial records RIGHT NOW and get them in tip top shape as if you have an auditor coming.  Leave nothing for “explanation.”  The less explanation, the more money and the happier you and your buyer will be.

Article Name
Record Keeping Before Selling My Company
I wish I had known that the buyer's financial team were going to dig that deep into my financial records and statements. It's not that I had anything to hide, it was just a messy and embarrassing.
About Dan Flick

He understands that no amount of MBA and Ph.D degrees can provide familiarity, the know-how, or the skills to professionally and effectively represent and manage every facet within the M&A (mergers and acquisitions) process, including assisting in the decision process, positioning a company for sale, marketing the company to a specific and targeted market, and most importantly, closing the deal while always recognizing the emotional needs of the owner.