🏴‍☠️ Getting Your Financial House in Order Before You Sell

Hey there,

Last week I was on a call with a tech company owner who'd been approached by an international buyer. They'd already reviewed the financials and made an initial offer. Sounds like a dream scenario, right?

Not quite.

Twenty minutes into our conversation, it became clear we had some work to do. This owner was using QuickBooks and had organized a deal room, which was great. But when we started digging into unit economics and financial modeling, gaps started showing up everywhere.

Here's what I see pretty consistently: business owners think having "good numbers" means they're ready to sell. But there's a massive difference between financials that keep you compliant and financials that get you maximum value in a sale.

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Clean Up Your Books First

Before you even think about talking to buyers, you need clean, organized financial statements. Not just for this year, but for the past three years minimum.

This tech company owner I mentioned? They had QuickBooks set up and a deal room organized. That's further than most get. But when buyers start asking about unit economics, customer acquisition costs, and lifetime value ratios, you need more than clean books.

You need your financial story ready to tell.

Know Your Real Business Model

Here's where it gets interesting. This owner's business was 90% upfront revenue and only 10% recurring. For their industry, that's actually backwards from what buyers want to see.

We spent time talking about shifting to a service model that could flip those percentages. More recurring revenue, less dependency on constant new customer acquisition. Same business, completely different financial profile.

The lesson: Your revenue structure directly impacts your valuation multiple. A business with 60% recurring revenue gets priced very differently than one with 10% recurring revenue.

Business Structure Can Make or Break Your Deal

Here's something most business owners never think about until it's too late: Your legal structure affects how much you actually walk away with.

This owner was considering converting from an LLC to a C-corp for fundraising reasons. But here's the thing... in an asset sale (which is common for smaller companies), a C-corp gets hit with double taxation. The company pays tax on the sale, then you pay tax when you take the money out.

That's potentially hundreds of thousands of dollars in unnecessary taxes.

We talked through the options: LLC, S-corp, and C-corp all have different implications for exit strategies. The "right" choice depends on your timeline, deal structure, and whether you're planning a stock sale or asset sale.

The Working Capital Reality Check

Another client I work with had a strong offer on the table... until they got to working capital calculations. Turns out they needed to leave way more cash in the business than expected.

Working capital is basically how much money the business needs in the bank to operate day-to-day. Buyers expect you to leave a "normal" amount. But what's normal for your business? That number can swing your net proceeds by hundreds of thousands.

The fix: Model this stuff before you go to market. Don't let buyers surprise you at closing.

The Real Talk

I watched another business owner discover their offer structure was "royalty-heavy" instead of cash-heavy. They had a decent valuation but terrible payment terms. All because they didn't understand deal structure before negotiations started.

Your financial house isn't just about clean books. It's about understanding:

• How your revenue model affects valuation

• What legal structure optimizes your exit

• How working capital impacts your net proceeds

• Why payment structure matters as much as price

Don't let good enough financials cost you six figures at closing.

Start with clean books. Understand your business model. Know your structure options. Model your working capital.

Because the difference between "compliant" financials and "exit-ready" financials is often the difference between getting an offer and getting the right offer.

Before You Go

If you're thinking about an exit in the next 18 months and want to know where your financials actually stand, hit reply. I'll tell you exactly what buyers will be looking for in your specific situation.

See you next week.

-Kinza