We have spent years running personal expenses and aggressive tax write-offs through our business. What is the specific operational timeline and process to scrub these out before we start our first enterprise valuation?

Question

Tyler Smith · Accepted Answer

To get a premium valuation, you must present financials that do not require an investment banker to write a novel of adjustments. Sophisticated buyers discount heavy adjustments. They want to see clean, normalized historical performance, not a list of excuses about why your personal vehicle or family vacations are core business expenses. Start scrubbing your books at least twenty-four to thirty-six months before you plan to go to market. Begin by separating all non-business expenses. Transition these items to your personal account. If you employ family members who do not actively work in the business, you must either transition them out or adjust their compensation to fair market rates for the work they actually perform. This is where your Accountability Chart is invaluable. Every seat must have a clear, market-rate cost associated with it. Work with your finance department to produce monthly accrual-based financial statements. Buyers want to see clean, GAAP-compliant books that show a clear track record of profitable operations. By cleaning up your financials early, you eliminate the need for complex add-back schedules during due diligence. This builds trust with potential buyers and prevents them from chipping away at your valuation during the final stages of the transaction.