Case Study: Services Business - Preparing For Sale

Headshot image of author Nicki Heck
By Nicki Heck
February 2, 2024

Actionable Financial Data Turns Profitability Around, Closing the Sale of a Business in 18 Months

When it comes to selling a business, only about one in five actually close–leaving many owner/founders at the mercy of finding the right buyer when they’re ready to exit.

Your exit strategy involves more than a negotiation over a fair market valuation for your business. It’s a process that begins months, or years, before you’re ready to leave. Our team helped a small founder/owner business with $2M in annual revenue prepare for the sale of their business, extracting financial data to market the business, secure a favorable multiple, and streamline due diligence for a successful sale process.

When You’re Ready to Sell…But Your Books Aren’t

There are more than 31 million small businesses in the United States–and the majority of them are owned by founder/owners approaching retirement. Even in the growing segment of millennial owners, founders are more transient, selling companies to move on to new opportunities.

These smaller businesses are also the most likely to experience problems closing a deal. A lack of reliable financial data creates ambiguity that can create serious roadblocks during due diligence.

For example, an owner might market the company and receive a letter of intent based on what they believe the company to be worth using the data that they have available. However, during the diligence process, the buyer discovers misclassified expenses or inappropriately recorded revenue. When that accounting mistake is corrected, the EBITDA (Earnings before Interest, Taxes, Depreciation, and Amortization) might be 20-30% less.

This difference will negatively impact the sale of the company. Buyers may lose confidence, and many will walk away leaving the seller to clean up the mess and try again. Often, this results in a lot of wasted time and effort on both sides.

Why does this happen? Ineffective accounting and bookkeeping processes create data pipeline problems from the very beginning. Here’s what this looks like…

A $2M owner-operated training services business had outsourced part of its bookkeeping tasks using offshore labor. The owner of the company was completing the rest of the work in house. While they felt that the books were getting done–these methods were not producing reliable data, creating more problems for the owner later on.

To compound the problem, the company utilized a low-cost fractional CFO that was deleting reconciled bank transactions resulting in a materially misstated balance sheet to the tune of more than $200k.

When the client was ready to explore a sale of the company, an advisor recommended that they hire to get their books in order.

Set up a free consultation with one of our experts today.

Clean Books Add Dollars to Your Sale Price

Our team helped fix the company’s data structure, creating a simplified chart of accounts with an appropriate naming and numbering system. We reconciled and cleaned up all accounts, documenting processes for:

  • Time Accounting
  • Accounts Receivable
  • Accounts Payable
  • Month End Close

Additionally, our team configured and validated third-party platform integrations to support financial reporting accuracy, providing our client with complete and timely reporting capabilities. This included Quickbook Online (QBO), Gusto, and additional industry-specific time accounting software.

To help our client achieve appropriate cost-control measures, we also identified tasks that the offshore resource could continue to do without degrading reporting accuracy while our team handled essential recurring accounting and controllership processes.

Each of these activities supported accurate, reproducible revenue figures resulting in a higher selling price that didn’t change during diligence.

Clear, reliable data helps build trust and credibility. This means that potential buyers are often more willing to accept seller’s terms and that there is less of a risk that small hiccups in diligence will derail the deal.

This level of transparency also supports strong messaging for marketing the company, promoting confidence in its valuation and attracting more potential buyers which can drum up competition and ultimately drive the sale price up.

All of this is just the beginning, complete and accurate financials can help:

  • Strengthen the Seller’s Position for Negotiation
  • Streamline Due Diligence
  • Limit Risk Exposure for Legal Issues

From Clean-up to Sale-close in 18 Months

The sale of a business isn’t a quick process–and when a small business is starting with gaps in their financial data, it’s an even longer process. Our team helped our client clean up their books, illuminating the need for pricing and personnel changes that enabled the seller to make those operational changes and sell the company within 18 months.

That’s a year and a half from saying “I think I might want to sell” to the owners seeing the purchase price in their bank accounts.

One of the key takeaways from this project was that our work made ‘profitability per training’ possible to see, creating a highly actionable area of focus for our client to improve and market on. As a result, our client was able to close a sale with an accelerated diligence period and a favorable multiple as a result of quality accounting data communicated through a quality of earnings assessment that validated the seller’s marketing position.

Each of these accomplishments worked in the seller’s favor, simplifying the process of selling the business without compromising on sale price.

Considering a Sale? Now is the Time to Look at Your Books

Outsourcing your accounting and bookkeeping isn’t always about operational efficiency. Sometimes, it’s about accessing talent to take a proactive step. If you’re considering selling your company in the next 2-5 years, now is the time to start preparing.

Learn more about how can help you prepare for a sale, adding value to the seller every step of the way.

Headshot image of author Nicki Heck

Nicki Heck

Nicki Heck is an Intuit QuickBooks Elite Pro Advisor who holds advanced certifications in QuickBooks Online, BILL, Expensify, Gusto, and other platforms in the QuickBooks Online ecosystem. She has more than 10 years experience integrating and configuring QuickBooks Online with third party platforms for hundreds of small and medium businesses. She studied business management at The University of Lethbridge, where she earned her BA.


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