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Buying Or Selling A Business- The First Obstacle

December 12, 2025

Whether you are buying or selling a business there is one obstacle to overcome. It’s on the seller to remove that obstacle but it’s up to the buyer to do their due diligence and make sure it’s done right. If it’s not, there should be no deal. At least no deal in it’s original proposed form. I’m talking about the business’s financials and bookkeeping.

You Are Driving Down The Value

I’ve seen this problem so many times when someone decides to sell their business. They might have a great business, it might be very profitable and therefore a valuable business and worthy of a fair selling price. But, without the proper accurate financial records the value cannot be proven. If you can’t prove the income you can’t prove the value.

Accounting Nightmares

Unfortunately many business owners are very negligent in their bookkeeping and financial records. That can happen for a lot of reasons including a lack of bookkeeping knowledge and experience or not being willing to hire bookkeepers and accountants because they want to save a buck, or good old fashioned procrastination. And there’s the reason we can’t talk about. Some owners take a lot of cash payments and keep it off the books. Once that’s been done and you close your books for the year and pay your taxes it’s very difficult to prove the real income to a buyer. That’s a real no-no for obvious reasons. I know it’s tempting to do that to save a little on your taxes. Don’t do it! It will cost you way more than what you saved when you go to sell your business.

Due Diligence

As a buyer it’s up to you to request all the financials you need to analyze the deal. You should always ask for at least three years worth. Of course in some cases the business might not be three years old yet so in that case ask for what they have. If they drag their feet getting you the records or if they try to leave something out, that should be a red flag. There are some exceptions. For example, a business owner might not be willing to provide tax returns because his company might own other income producing assets under the same business name that are not included in the sale of the business. That’s understandable.

This is by no means a tutorial on buying or selling a business. This is one aspect of it that I see repeatedly holding people back in the sale of their company. My suggestion to business owners is to start today acting as if you are planning to sell your business whether you actually try to sell it or not. You never know when you might need to. If all your financials are in order the rest of it will be much simpler.

There are a lot of AI powered bookkeeping platforms out there. Many of them can cut your hands on bookkeeping by 70 or 80%. And they are relatively cheap. There’s no longer any reason to not have your accounting up to date. Go explore. See what’s out there! Make your business sellable!

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That's it for this time. See you next week!

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