What a Buyer Asks For First, and What Being Slow Costs You

The meeting goes well. He liked the operation, he liked you, and on the way out he says he will send over a short list of things to look at.

That list arrives within a day or two, and a clock you cannot see starts running.

The list

It is short, and it is the same list almost every time:

• Three to five years of financial statements, and the tax returns that go with them
• Current year to date, monthly
• Revenue and gross margin by product line or service line
• Your top customers and what each represents as a percentage of revenue
• Accounts receivable aging
• A current depreciation schedule
• Any contracts that matter — leases, key customer or supplier agreements, borrowing agreements
• A schedule of owner compensation and owner benefits

Nothing on that list is unreasonable and nothing on it should be a surprise. It is the minimum anyone needs to form a view.

What slow actually costs

You say next week. Next week you are in the plant solving something and you say the week after.

Here is the thing owners consistently underestimate: a buyer of any scale is looking at hundreds of companies a year. You are not his only conversation and you were never going to be. Three weeks of silence does not read as a busy owner. It reads as an owner who does not have the information, which raises a question he was not asking before.

And that question is the expensive one, because it is not about the documents. It is about whether a business that cannot produce a receivables aging in a week is really running the way you described in the meeting.

You can lose a buyer without ever getting a no. He simply stops writing, because something else moved faster.

Three years of statements is a floor, not a test

Most owners hear “financial statements” and think the box is ticked. It is not, for a reason that is structural rather than a matter of effort.

A P&L cannot show the buyer what you actually take out of the business. The owner benefits that any sensible valuation adds back — your compensation above a market replacement, the vehicle, the phone, the travel that is really personal, the family member whose contribution is less than the payroll line — are scattered across accounts that were never built to isolate them.

So you tell him the number. And he is not going to take your word for it, which is not an insult, it is the job. Every add-back you cannot document is an add-back that comes out of the earnings he is pricing, and the multiple applies to the earnings he accepts rather than the ones you asserted.

Worse, a schedule that is missing support does not land as neutral. It arouses suspicion about the rest of the reporting, and now he is discounting things you did document.

The fix is a schedule, built in advance, line by line, with evidence behind each entry. Five years of it, matching the statements. This is not difficult work. It is work that takes weeks and cannot be done while a buyer waits.

What ready looks like

Ready is not a promise that you can get something. Ready is that when he asks, it goes out the same day, in a form he can use, because it already exists.

The practical standard is simple. Everything on the list above, current, in one organized place, before you take the first meeting. Named sensibly. Reconciling to each other. Add-backs supported. If three people in your company would produce three different customer concentration numbers, you are not ready, and the version he gets will be argued over later.

A well-run data room is also a piece of evidence in itself. It says, before he reads a single line, that the company is run the way you said it is.

The part that is really being tested

Diligence is not only a search for problems. It is a long, indirect test of whether what you told him is reliable.

Every fast, complete, internally consistent answer makes the next claim easier to accept. Every slow or partial one makes him look harder at something else. By the time he is pricing, he has formed a view of you that is doing quiet work on the multiple, and you will never see it itemized.

Get the documents in order first. It is the cheapest thing on this list and the only one that is entirely within your control.

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This is what we do. Prism Edge gets the reporting to the point where it answers a buyer the same day, every time: the schedules, the support behind every add-back, and concentration numbers that reconcile. It is the cheapest work in a sale, and it has to happen before anyone asks.

And the full chapter on this is in Selling Your Business The Easy Way, free to download here.