Financial Projections for M&A

In selling your business, the prospective buyer will want to see financial projections showing how you expect the company to perform.

There are three financial statements to complete:  Income statement, Balance Sheet, and cash flow statement.

It’s important to develop a realistic projection.

The projections should take into account the buyer and their plans for the company.

The goal is to show how acquiring your business will help them.

The buyer may want to reduce costs, increase sales, or maintain the status quo.

The buyer will review the financials for any outstanding obligations such as debt or accounts payables.

They will want to understand the assumptions used to build the numbers.

They want to know how much you believe in the forecasted numbers and may ask you to take ownership of achieving the forecast.

It’s important to understand why the buyer wants to acquire your company before building your financial projections.

The goal is to show how your company can help solve the buying company’s problems.

 

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Hall T Martin is the director of Investor Connect, which is a 501(c)(3) nonprofit dedicated to the education of investors for early-stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon for the basis of investment decisions.