We are debating whether to pay for fully audited financial statements or just reviewed ones during our three-year exit runway. How do we determine which level of financial reporting will actually yield a higher return on investment when we go to market?

Question

Tyler Smith · Accepted Answer

Buyers discount risk. Reviewed financials are better than compiled ones, but institutional buyers and large strategics usually require audited financials for the prior two to three years. If you are targeting a business valuation above ten million dollars, paying for a full audit on your exit runway is almost always worth the investment. It eliminates the buyer's excuse to discount your purchase price based on accounting uncertainty. To execute this, make the transition to audited financials a major Rock. Have your finance seat on the Accountability Chart partner with a reputable regional CPA firm. Do not wait until you have a Letter of Intent. Start the audit process at least two years before your target exit date. This gives you time to fix any revenue recognition issues or balance sheet anomalies that the auditors uncover. By presenting clean, audited financials from day one of due diligence, you signal to buyers that your operations are professional and that you have nothing to hide. This moves negotiations forward faster and keeps the buyer from chipping away at your enterprise value.