Services03 of 09
Across both paths · Financials
Prove the numbers behind the story.
Financial preparation isn’t handing a buyer your tax returns. It’s proving the financial story of the company.
Financial Preparation
A buyer needs to understand where the money comes from, where it goes, how consistently the company produces profit, and whether those results can continue after you leave. Good financial records don’t create the profitability of your business — they prove it. And when you’re selling, what you can prove is worth far more than what you can say.
Who this is for
- You only find out how the year went when the accountant prepares the tax return.
- Personal and business expenses run through the same accounts.
- Jobs aren’t costed — or the job-cost reports don’t agree with the P&L.
- A buyer, lender or broker has asked for statements you can’t produce quickly.
What we do
The work, in order.
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01
The accounting system
QuickBooks, Sage, Xero or a contractor-specific ERP — the brand matters less than whether it is used correctly, consistently and in enough detail to explain the business. For a contractor that means revenue and costs separated into meaningful categories: service, maintenance, replacement, new construction, projects, divisions. Project-driven contractors also need reliable job-costing, work-in-progress, backlog, retainage and billing information.
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02
Do you actually close the books every month?
It’s our basic financial-health test. If we ask, “What did you make last month?” — can you show us? A well-prepared company maintains monthly profit-and-loss statements and balance sheets, reconciled bank and credit-card accounts, receivable and payable aging, payroll records, loan balances and, where applicable, WIP and job-cost reports.
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03
A clean financial history
The goal is a history a buyer, CPA, lender or valuation professional can follow and verify: three years of tax returns and year-end statements, monthly P&Ls, trailing-twelve-month results, general ledger and trial balances, reconciliations, aging reports, payroll including owner compensation, debt and equipment schedules, asset lists, WIP and backlog, revenue and gross profit by service line and major customer, recurring agreements, customer concentration, related-party transactions, and the documentation behind owner and one-time expenses.
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04
Normalized earnings
The tax return shows one level of profit; it doesn’t necessarily show what the business economically produces for an owner or a buyer. Owner salary and benefits, discretionary expenses, family compensation, unusual professional fees and nonrecurring costs all need to be identified and documented — never simply added back because the seller wants a higher valuation. Unsupported adjustments damage the credibility of everything else.
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05
Quality of revenue
How much is recurring. How concentrated the customer base is. Which divisions are most profitable. Whether margins are stable. How much work is already under contract. And whether revenue depends on the owner’s personal relationships. Two contractors producing the same $5 million are not the same $5 million businesses.
The questions
What we’re trying to determine
- How accurate and current are the books?
- How many years of reliable financial history exist?
- Are the financial statements reconciled monthly?
- Can revenue and profit be analyzed by division or service line?
- Is job costing reliable?
- Are owner expenses and legitimate add-backs documented?
- Are receivables collectible and payables current?
- Are debt and equipment obligations clearly documented?
- Is recurring revenue identifiable?
- Is customer concentration understood?
- Can the company’s earnings be reproduced without the current owner?
The principle
Good financial records don’t create the profitability of your business. They prove it.
What you get
What you walk away with.
- A financial-health review of the accounting system and the monthly close
- The financial package a buyer, CPA, lender or valuation professional can follow and verify
- A normalized-earnings schedule with every adjustment documented
- Revenue and gross profit by service line, division and major customer
- Weaknesses identified — and corrected — before a buyer finds them
Insights
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