Insights

The Seven Files That Tell the Truth About a Business

What an auditor, and a buyer, opens first, and what good looks like in each one. By Svetlana Mysaka, Director of Communications. Version française incluse.

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By Svetlana Mysaka, Director of Communications

Our founder Benjamin Kobe spent years as a CRA income tax auditor. Ask him how an auditor reads a business and the answer is always the same: you don't listen to the story first. You open the files.

Buyers work exactly the same way. When a business goes up for sale, the buyer's accountants get 60 to 90 days to open everything. That period is called due diligence, and it is where most deals quietly die, not on price, on proof. Here are the seven files that get opened first, and what "good" looks like in each one.

1. The bank reconciliation

Does the accounting system actually match the bank, every month, on time? This is the first credibility test. If January is reconciled in June, everything else in the books inherits that doubt. Good looks like: every month closed within 15 days.

2. Revenue by customer

Not total revenue, revenue by name. What happens if the biggest name leaves? If one customer is more than about a quarter of revenue, a buyer reads risk, and risk becomes a discount. Good looks like: no single customer you couldn't survive losing.

3. Margin by product or job

Many owner-run businesses know their total margin but not which products earn it. That means pricing is a habit, not a decision. Good looks like: you can name your most and least profitable line without opening a spreadsheet.

4. The contracts folder

Customer agreements, supplier terms, the lease, employment contracts, signed, current, findable. An expired lease on a location the business depends on has stalled more than one sale. Good looks like: every key relationship on paper, one folder, current versions.

5. The payroll and HR file

Who works here, on what terms, with what vacation owing? Informal arrangements that "everyone understands" become liabilities the day an outsider prices the company. Good looks like: a written record for every person, no surprises owing.

6. The tax filings

Returns filed and paid, income tax, GST/PST, payroll remittances. This one is pass/fail. Nothing frightens a buyer faster than a tax balance nobody mentioned. Good looks like: everything filed, everything paid, statements to prove it.

7. The owner's calendar

The quiet file nobody thinks of as a file. If the owner's week goes to approving, deciding and fixing, the owner is the operating system, and the business's value walks out the door with them. Good looks like: a business where the owner could take 30 days off and the machine keeps running.

None of these need a buyer to be worth fixing. A business with clean files, real margins, contracts on paper and a runnable calendar is simply easier to own, this year, not just at sale time. Find out where you stand with the free Exit Readiness Score.

Version française, Les sept dossiers qui disent la vérité sur une entreprise

Notre fondateur Benjamin Kobe a passé des années comme vérificateur de l'impôt à l'ARC. Demandez-lui comment un vérificateur lit une entreprise : on n'écoute pas l'histoire d'abord. On ouvre les dossiers. Les acheteurs travaillent de la même façon, 60 à 90 jours de vérification diligente, où la plupart des transactions meurent en silence. Pas sur le prix : sur la preuve.

1. La conciliation bancaire, chaque mois fermé en 15 jours. 2. Les revenus par client, aucun client dont la perte serait fatale. 3. La marge par produit, vous nommez votre ligne la plus payante sans ouvrir un fichier. 4. Les contrats, chaque relation clé sur papier, versions à jour. 5. La paie et les RH, un écrit pour chaque personne, aucune surprise due. 6. Les déclarations fiscales, tout produit, tout payé, relevés à l'appui. 7. L'agenda du propriétaire, une entreprise qui fonctionne 30 jours sans lui.

Aucun de ces dossiers n'a besoin d'un acheteur pour valoir la peine d'être réglé. Nos services en français, et le Score de préparation à la vente, gratuit, dix minutes.