When you sell a business, the buyer is really buying its future earnings. The only proof of those earnings is your books. Clean, consistent financials make your business easier to value, easier to finance and faster to close.

The SBA describes three common approaches: income (projected earnings, adjusted for risk), market (what similar businesses sold for) and assets (what the business owns minus what it owes). All three start with your financial statements.

Buyers pay for numbers they can trust.

Start gathering these items before you talk to a broker or a buyer.

Profit and loss, balance sheet and cash flow, reconciled every month and matching your tax returns.

Buyers and lenders will compare them line by line with your statements.

List owner expenses that run through the business, one-time costs and above- or below-market owner pay. These “add-backs” can raise your valuation, but only if you can document them.

Collect old receivables, write off what won’t be paid and separate personal assets from business ones.

Unpaid tax liabilities can delay a closing or reduce the price.

Ideally, begin one to three years before you sell. That gives you time to show a clean track record, fix problems and plan the tax side of the sale. How the deal is structured, as an asset sale or a stock sale, can change what you keep after taxes. For family transfers, the SBA notes that estate and gift tax rules may apply.

The SBA recommends working with an attorney, an accountant and a business valuation expert. Your accountant prepares the numbers buyers will review. Your attorney drafts and reviews the sales agreement.

Thinking about selling in the next few years? Let’s talk about getting your financials ready.

This article is for general information only and isn’t legal or tax advice for your specific situation.