Selling a Business - Financial Packaging

It will be imperative prior to selling your business that the financial side of your business be evaluated. Any interested party is going to look at your balance sheet and operating statement to determine the real financial value of the company. You need to have your assets in order, documented and balanced.  Your profit and loss statements should be utilized by setting up realistic financial projections, based on future sales and related expenses.  Most of all, it is necessary to understand  the cash flow that will be available to the purchaser over the next two years, in order to assist you in the operating the business.   

Financial projections should be prepared for 3 to 5 years out and should realistically reflect what the company’s revenues, expenses, and then of course arriving at net income.    

Recasting financials to reflect the true economic value of a company, by adding back to net income, any previously deducted expenses. Some of those for example, would be depreciation, owner’s excess salaries, family benefits and non-operating interest expense. You would then remove obsolete inventory and assets along with eliminating any loans granted by the owner of the company, as most likely these would be uncollectible. This is just an abridged version of the process in moving towards the sale of your company.