When you’re preparing to sell your Internet business, you’ll have a number of things to consider and do. As you develop your exit strategy, one thing that you simply can’t afford to neglect is preparing accurate financial statements. While you can tell prospective buyers about your success, your financial statements are the proof that buying your website is a lucrative business opportunity, so you simply can’t underestimate their importance.
Problems with the accuracy of financial statements can jeopardize any deal by:
- Ruining buyer trust – If a buyer believes that you intentionally withheld or falsified information, he or she may just choose to walk away from the deal, even if it truly was an honest mistake.
- Delaying the process – When a buyer or a financial expert that they have hired discovers an error, the sales process can grind to a halt. The sale of your business can be delayed for weeks or a month or more while you and the prospective buyer try to rectify/reconcile the error.
- Loss of financing – A buyer who is relying on outside financing or investors to raise funds for the purchase could lose their opportunity to obtain funds, causing the deal to collapse.
- Legal liability – In the event that the sale is completed without a material error being discovered, you could one day run the risk of litigation for fraud even though the error may be an honest mistake.
To ensure that your financial information is correct, you must fully account for not only sales but also operating costs. Examples include inventory, salaries paid to employees, fees and charges for technology use, shipping costs, rent payments, financial fees and telephone and utilities. Many business owners choose to have profit and loss statements prepared by an accountant to reduce the risk of errors. If you do decide to prepare the statements yourself, be sure to consult your Internet business broker for help and guidance on the potential upfront need to employ a CPA to assist in insuring the accuracy of your financial information. Your Internet business broker has facilitated the sale of many transactions, he or she can provide advice to help you avoid costly errors.