A client came to us six months before she planned to sell her agency. She’d been in conversations with a buyer, felt good about the number on the table, and was ready to move into due diligence. Then we pulled her balance sheet.
What We Found
The balance sheet wasn’t dishonest. It just hadn’t been maintained with a transaction in mind. There were intercompany loans that hadn’t been formally resolved, personal expenses run through the business that had accumulated quietly over years, asset entries that hadn’t been updated, and retained earnings that didn’t reconcile to what the owner thought she had.
None of it was unusual. Most agencies that haven’t been through a sale before look like this. But to a buyer, or their accountant, a messy balance sheet reads as either sloppy bookkeeping or something to hide. Either way, it creates leverage to push down the price or introduce contingencies into the deal structure.
Here’s what a buyer’s team is actually looking for:
Any one of these, left unresolved, is a lever a buyer can use. Together, they’re a reason to walk away entirely.
What We Fixed
We spent three months cleaning things up. Personal expenses were recharacterized or properly documented. The intercompany loans were resolved. Asset values were corrected and depreciation schedules updated. We rebuilt the retained earnings reconciliation from scratch.
By the time the buyer’s due diligence team came in, everything was clean and documented. The questions we anticipated were answered before they were asked. That matters more than most sellers realize. A clean data room signals a well-run business, and well-run businesses command full price.
The Outcome
The sale closed at the original number. No renegotiation, no last-minute price adjustments, no extended contingency period tied to unresolved balance sheet items. The buyer’s team noted in their closing summary that the books were well-organized. That’s not common.
More importantly, the owner knew exactly what she walked away with. No surprise tax adjustments after closing, no holdbacks tied to undisclosed liabilities. When the preparation is right, closing feels like a formality.
Common Questions
How far in advance should I clean up my books before selling? Six months is a reasonable target for most agencies, though the right timeline depends on how much needs to be untangled. Intercompany loans and years of commingled personal expenses take longer to resolve than a simple depreciation update.
What if I’ve mixed personal and business expenses for years? It’s fixable, but it takes time to go back through the history and properly recharacterize or document each item. This is the single most common issue we find, and also the most time-consuming to unwind.
Does a clean balance sheet actually affect valuation, or just deal terms? Both. It can affect the multiple a buyer is willing to pay, and it almost always affects the terms: contingencies, holdbacks, and post-closing adjustments are where an unclean balance sheet costs sellers money even when the headline price doesn’t move.
Thinking About Selling in the Next Year or Two?
If this sounds like your agency, the earlier we look at your balance sheet, the more time there is to fix what’s fixable. We’ll review it with you and flag exactly what a buyer’s team would flag first.
Get in touch and we’ll take a look.
