Preparing Your Financials to Sell a Business in New York
I've sat on the buyer's side of this process. At Johnson & Johnson I worked acquisition and divestiture operations, running diligence and separation planning on live transactions.
The thing that surprised me most: deals rarely fall apart because a business performs badly. They fall apart because the numbers can't be explained.
What the buyer's analyst is testing
One question, asked many ways. Are these earnings repeatable?
Anything they can't verify gets resolved against you. Not out of hostility, but because they're building an internal case they'll have to defend, and ambiguity is risk they price in.
By the time you're negotiating on price, the number is mostly determined already by what your records can support. The valuation conversation feels like the important one. The quality of earnings review is the one that set the ceiling.
Revenue recognition does the most damage
If you book revenue when you invoice rather than when you earn it, or all at once when a contract signs instead of across the period you deliver, your monthly profit is fiction.
Strong months and weak months become artefacts of timing. A buyer will normalise it, normalising almost always reduces the earnings they underwrite, and it makes everything else you've presented look uncertain by association.
Correcting this and rebuilding a trailing 24 months on the corrected basis takes real time. That is the argument for starting early, and it's why eighteen months ahead is comfortable while six months ahead is damage control.
The rest of what gets tested
- Personal expenses through the business. Every add-back needs documentation a stranger would accept. Undocumented ones get denied.
- Cash basis books. Most buyers underwrite on accrual. Converting mid-process looks like changing the story.
- Customer concentration. Common in New York professional services. Not fatal, but you surface it first, or they discover it and wonder what else is hidden.
- Loose monthly close. Untrustworthy trends get discounted.
- No data room. Scrambling for documents suggests the rest is disorganised too.
How I approach it
I work backward from the questions a buyer will ask. Revenue recognition onto a defensible basis. Add-backs documented to survive scrutiny. Trailing financials rebuilt consistently. The diligence package assembled before anyone requests it.
I'm Ben Cohen, founder of Visionary Arc Finance and a former PwC Senior Manager. I work remotely with New York companies, alongside your CPA and your banker or M&A advisor rather than instead of them.
When the analyst asks why margin moved in Q3, there should be a documented answer waiting.
Common questions
How long does this take?
Eighteen months is comfortable, twelve is workable. Under six and you're limiting damage rather than improving the outcome, because a corrected revenue basis needs trailing history behind it to be credible.
Do I still need a banker?
Yes. They run the process and negotiate. I make sure the financial story underneath holds up when examined. Different jobs.
Our books are a mess. Is it too late?
That's the reason to start now rather than a reason to wait. Cleanup before a process is ordinary preparation. Cleanup during one reads as a warning sign.