I am finally getting serious about selling my 22-year-old landscaping business. Revenue is around $2.1M, but my books are a hybrid mess , QuickBooks for the main stuff, a separate spreadsheet for cash jobs, owner draws that are not clearly separated, and a truck purchase that got run through as an expense last year. I am not trying to hide anything; I just never had a bookkeeper who really cleaned it up. How do buyers actually value something like this? Do I need a full audit before listing, or can a good QoE person sort it out? What did you do with your messy books?
Valuation
How to value a small business with messy or hybrid accounting
Get a quality of earnings person before you list. They will normalize owner comp and non-recurring junk. An audit is overkill and expensive for a business your size.
Following. My books are basically a crime scene so I feel your pain.
Is the truck on the books as a $60k expense? Buyers will add that back as EBITDA but if it is really a capex item and not a one-time thing, you just mkved the goalposts. QoE will catch it either way.
I sold a cleaning company in 2021 with similar hybrid accounting. What saved me was reconstructing 3 years of P&Ls from bank statements and job invoices. Took two months and probably 80 hours but the buyer trusted the numbers way more once they saw the trail. Do not lead with 'my books are messy.' Lead with 'here is my cleaned-up reconstruction and here is my QoE.'
How much does a QoE run for a business this size? Ballpark?
Probably $10k–$25k depending on scope and whether they help reconstruct. Cheap relative to a valuation miss.
Your problem is not valuation, it is credibility. Cash jobs and undifferentiated draws tell a buyer the real number might be lower than what you claim. I would get a CPA to sign off on a reconstruction, not an audit. Audits are for public companies and people who enjoy burning money.
What if some of the cash jobs were never invoiced? Do you disclose that?
Yes, disclose. Red flag if it comes out later. Also your tag says Valuation but this is really more of a 'books and records' issue.
One more thing: separate owner draws from business expenses. Buyers price off seller's discretionary earnings. If your draw is buried in operating costs, you are understating profit and undervaluing yourself. Sloppy books usually hurt the seller more than the buyer
22 years and $2.1M revenue with no bookkeeper? Respect honestly.
This thread is drifting into tax territory but yes, fix the draws first. A buyer's lender will care about clean statements, not just your QoE.
The truck thing: if it was expensed and the buyer adds it back, tuey will then ask why they are buying a business that needs a $60k truck replaced every year. Have an answer ready.