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Accurate Budgets and Projections Are Key to Successfully Selling Your Business

Keith A. Veres, CPA, CGMA™, CEPA


There’s no shortage of privately owned businesses for sale, which means potential buyers have lots of options. As a business owner, you must have your ducks in a row to maximize your chance for a sale at prices and with terms acceptable to you and your family. In addition to a strong historical performance, accurate budgets and projections will substantially improve the probability of completing a favorable sale.

Let’s explore why.

Your ability to generate accurate budgets and projections conveys several important messages to potential buyers. It tells them you have been actively managing your business, that reliable financial information is important to you, and that you understand your business well enough to project future performance with reasonable accuracy. Keep in mind that buyers of businesses have a great deal of work to do to determine if your business is right for them. Unlike real estate transactions, buying a business is complicated, and the time and effort that goes into a buyer’s due diligence is a significant investment in and of itself. We’re all busy, and no one wants to waste time and money on a deal with little chance of crossing the finish line.

Credibility and confidence
Your ability to produce accurate budgets and projections tells a buyer something substantial about your business, and more importantly, about you and your management team. Proper use of budgets and projections plays a critical role in how effective the owners and management team can be. If you become good at it, you will see problems and opportunities more quickly than businesses that simply plug along hoping for the best. Being on top of this critical management responsibility lends significant credibility to you and your management team, and buyers will feel confident that you and your team understand your business, which is key because they are relying on you to help them understand your business.

It’s an oft-repeated business principle: You can’t manage what you can’t measure. If your accounting department is not providing you and your management team with timely financial information, you might not be able to identify problems and opportunities until it is too late. Having accurate and reliable projections allows you to compare them to your actual results and make real-time decisions. And while having the information is always critical, it can be even more critical when you are attempting to sell your business.

Projecting future results
As mentioned, buyers are interested in historical performance. But their return on their investment will rely on future results. As such, most prospective buyers will request projected financial information. You don’t want their request to be the first time your team attempts to prepare those documents; ideally, you’ll want to show accurate projections from at least the previous two or three years.

Your history of accurately projecting business performance will help you in at least two ways: First, it will tell the buyers that you have a handle on your internal financial reporting process. Second, it will give them some level of comfort concerning the projected financial statements you are giving them to review and rely on. If your team is not currently generating projections, get them started ASAP. You will be happy you did when it is time to market your business to potential buyers.

During the sales process, a prospective buyer will learn firsthand how well you project the performance of your business, which can be key to keeping the sales process moving in a timely manner and avoiding unnecessary delays. The sales process typically takes six to eighteen months. You’ll want your actual results to meet, maybe even exceed, the projected financial statements through that period, as the time it takes to go through the business sale process will allow a potential buyer to see how your actual results compare to your projections. Explaining why your performance is materially different from your projections can prove extremely uncomfortable—unless the difference is positive. And even if all differences are positive, if they are significant, buyers may still question whether you and your team truly understand your business.

Buyers want to see that you and your team understand the finances of the business and can provide them with a level of comfort concerning future expectations, at least for the first year of their ownership. There are many things a business owner can and should do to meet those expectations, but providing a level of comfort about the reliability of your financial information should be a priority.


The information included in this document is for general, informational purposes only. It does not contain any investment advice and does not address any individual facts and circumstances. As such, it cannot be relied on as providing any investment advice. If you would like investment advice regarding your specific facts and circumstances, please contact a qualified financial advisor.

Any investment involves some degree of risk, and different types of investments involve varying degrees of risk, including loss of principal. It should not be assumed that future performance of any specific investment, strategy or allocation (including those recommended by HBKS® Wealth Advisors) will be profitable or equal the corresponding indicated or intended results or performance level(s). Past performance of any security, indices, strategy or allocation may not be indicative of future results.

The historical and current information as to rules, laws, guidelines or benefits contained in this document is a summary of information obtained from or prepared by other sources. It has not been independently verified, but was obtained from sources believed to be reliable. HBKS® Wealth Advisors does not guarantee the accuracy of this information and does not assume liability for any errors in information obtained from or prepared by these other sources.

HBKS® Wealth Advisors is not a legal or accounting firm, and does not render legal, accounting or tax advice. You should contact an attorney or CPA if you wish to receive legal, accounting or tax advice.

HBKS is not a registered investment banking firm and does not conduct securities business in connection with the purchase or sale of a business. If you need investment banking services, please contact a registered investment banking broker dealer.

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