I'm getting ready to list my e-commerce business next year. My books are a mess from the last three years of DIY QuickBooks and commingled expenses. I keep hearing I should hire a CPA to clean them up before going to market. The quotes I'm getting are $8k-$12k. Is that really worth it, or can I just hand over the shoebox to the buyer and let them deal with it?
Accounting
Why hiring a CPA to fix books is worth it
If you hand over a shoebox, serious buyers will walk. No one wants to pay for your cleanup.
The $8-12k is probably the best money you'll spend in the sale process. Buyers and their lenders need clean financials to get financing. If your books are a mess, you either scare off buyers or you get hit with a major price reduction or earn-out clause that costs way more than the CPA fee.
I sold a service business two years ago. My CPA cost me $6k to clean up two years of books. The buyer's due diligence found zero issues, and we closed in 45 days. Worth every penny.
What exactly does the CPA do that a good bookkeeper can't? Genuine question. I'm in a similar spot.
A bookkeeper records transactions. A CPA can restate financials, handle accrual adjustments, and give you a reviewed or compiled statement that buyers actually trust. It's a different level of assurance.
I'm a CPA and I do these cleanup engagements. The biggest value isn't just the clean boks. It's that we find the personal expenses you've been running through the business. In a sale, those need to be added back to show true earnings. If a buyer finds them first, your credibility takes a hit and they start questioning every number.
That's the part that worries me. I definitely have some personal stuff mixed in. Would it be better to try to fix that myself first to save money?
Don't do it yourself. You'll miss thinGs and create inconsistencies. The CPA will have a process for it. Just be upfront about the commingling from the start.
Also, the CPA will likely provide a quality of earnings report or at least help you prepare for one. That's what buyers use to value your business. If your numbers are clean and defensible, you get a better multiple.
One more thing: get a CPA who has experience with M&A, not just tax prep. Ask them if they've done sell-side diligence support before.
This. I can't tell you how many sellers bring me books cleaned up by their tax guy and the financials are still not in a format a buyer can work with. It's not the same skill set.
So if I'm 18 months out from a sale, is now the time to start? Or wait until I'm closer to listing?
Start now. You want at least a year of clean financials before you go to market. More if you can.
Alright, this has been helpful. I'm going to start interviewing CPAs next week. Any red flags to watch for in the initial calls?