Want to Sell and Did not Keep Good Records? Now What?

You are tired of running the business. You want out. You have not been interested in it for a while now, months or even a few years. Not being interested, you let the paperwork accumulate. Now that you want to sell, you know that the first thing the buyer will want is proof of your income and expenses. See what I tell the buyer in Buying a Business? How do you Know the Profit is Real? I also tell my clients who are considering buying a business to flatly refuse to consider.

  1. Income that is not clearly reported on the seller's sales tax returns, income tax return, and bank deposits, and
  2. "padded" expenses. If the seller says "my utilities are really $2,000 a month but I show $2,500 because I let this business pay the expenses of my other business, so you can really add back $500 to the bottom line," I tell my client who is the buyer not to add back the $500. Hold the seller's feet to the fire!
If you have next to nothing to prove your sales, expenses, and profit, you have a difficult task ahead of you. But there is hope.

These are the steps you need to take.
  1. It will take you at least one full month and probably three full months to prove your business' profitability to an informed prospective buyer. Do not expect a quick solution.
  2. Find an outside service to help you. We can help you. Expect the cost to be expensive.
  3. Pick a date to begin the process. If it is any day but the first, it will be more difficult to convince the buyer that the information is thorough, honest, and accurate.
  4. Have a beginning inventory done by an outside company as close to that date as possible. Send it to us.
  5. Each day send us the following:
    1. Daily sales
    2. Paid outs, to whom, for what, how much?
    3. Bank deposit amount
    4. Credit card sales
    5. Copies of checks and the invoices or bills they paid
    6. invoices for merchandise that day whether paid or not
  6. Have an ending inventory done as close to the end of each month and send it to us.
  7. We may ask for more information.
  8. When we prepare a P&L for each month, if the gross profit for any sales category is higher than usual for that size store, we will attach a statement to that effect. If you can prove that a higher-than-expected gross profit percentage is correct, we will still make the comment that it is higher but explained how you proved it so.

What you have is comparable to a flat tire on the Interstate. The sooner you start, the sooner you will have a reasonable proof of what your business is worth.