Protect your sale price before buyers find the weak spots.
You may have built a profitable company with loyal customers and a strong reputation. But small gaps in paperwork and day-to-day operations can make a buyer hesitate, question the numbers, or ask for a lower price.
The good news: many of these issues are among the cheapest improvements you can make before a sale. A buyer does not expect perfection. They do want a business they can understand, verify, and take over with confidence.
If you plan to sell a business in California, use the months before going to market to close these gaps. Here are 12 places to start.
1. PERSONAL EXPENSES IN THE BOOKS
Buyer reaction: “Are these really business expenses, and can I trust the reported profit?”
Personal vehicles, meals, travel, phones, and other owner expenses may have legitimate business and personal parts. But if they are mixed together without a clear record, a buyer may reject the claimed adjustments or take a more conservative view of earnings.
Practical fix: Ask your accountant to identify personal expenses and document any proposed adjustments with receipts, invoices, and a clear explanation. Don’t rely on a verbal promise that “it was just a personal item.”
2. FAMILY PAYROLL WITHOUT DEFINED ROLES
Buyer reaction: “What work does this person do, and will I need to keep paying them?”
When a relative is on payroll without a job description, hours, or clear responsibilities, the buyer may question both the expense and how the business operates. The cost of replacing their work may also matter.
Practical fix: Document each employee’s role, regular duties, schedule, compensation, and employment status. If a family member performs important work, show what that work involves and how it can continue after the sale.
3. UNREPORTED CASH SALES
Buyer reaction: “If I can’t verify the revenue, I can’t pay for it.”
Cash sales that aren’t recorded in the books or supported by the company’s tax filings are not a safe way to demonstrate earnings. They can create tax and credibility concerns, and a buyer may value the business using only verifiable revenue.
Practical fix: Record every sale through your accounting system or point-of-sale tools. Reconcile daily sales reports, deposits, and tax records. Don’t present unreported income as an adjustment to profit; ask a qualified tax professional how to address past reporting issues.
4. LATE OR MISSED SALES TAX FILINGS
Buyer reaction: “Could there be unpaid taxes, penalties, or a delay in closing?”
California seller’s permit holders must file returns according to their assigned schedule, even when there are no sales or no tax due. The CDTFA’s seller’s permit guide explains filing responsibilities and what sellers need to do when selling or closing a business.
Practical fix: Work with your accountant to bring filings current, check for notices, and gather proof of filed returns and payments. Resolve questions early. Don’t wait until a buyer or escrow asks for the documents.
5. EXPIRED LICENSES AND PERMITS
Buyer reaction: “Can the business keep operating, and can these approvals transfer?”
A permit may be tied to the owner, location, or type of business. A buyer who discovers an expired or nontransferable approval may need to delay plans or apply for a new one.
Practical fix: Make a list of every license and permit, including its issuing agency, expiration date, renewal steps, and transfer requirements. Use CalGOLD to identify agencies that may apply, then confirm details directly with each agency. CalGOLD does not issue permits or confirm the status of a specific license.
6. LAPSED OR UNCLEAR INSURANCE
Buyer reaction: “Is the company protected, and can I obtain coverage after the sale?”
An expired policy, unclear coverage, or missing claims history can raise questions about risk and continuity. It may also make it harder for a buyer to arrange coverage that suits the business.
Practical fix: Keep current policy documents, declarations pages, endorsements, renewal dates, and available claims history together. Ask a licensed commercial insurance professional to review potential gaps. The California Department of Insurance’s commercial insurance guide explains common business coverages and the role of commercial insurance professionals.
7. A MONTH-TO-MONTH LEASE WITH NO RENEWAL OPTIONS
Buyer reaction: “How long can I stay here, and will the landlord approve the transfer?”
The location may be a key part of the business, but a short or uncertain lease can leave the buyer worried about rent changes, landlord approval, or having to relocate.
Practical fix: Review your lease, amendments, renewal dates, assignment rules, and any landlord consent requirements. Discuss the available options with your landlord and qualified advisors before going to market. A buyer needs clear information; do not promise that a lease can transfer until that has been confirmed.
8. EXPIRED CUSTOMER CONTRACTS
Buyer reaction: “Will this revenue still be here after I buy the business?”
A past customer relationship is not the same as a current contract. Expired terms, unclear renewal rights, or transfer restrictions can make recurring revenue less certain.
Practical fix: List important customer agreements, renewal dates, termination terms, and any assignment or change-of-control requirements. Identify contracts that need renewal or customer consent, and get professional advice before approaching customers about a possible sale.
9. UNDOCUMENTED VENDOR AGREEMENTS
Buyer reaction: “Can the company keep its suppliers, terms, and essential services?”
If key arrangements exist only through emails, verbal promises, or the owner’s personal relationships, the buyer may worry that supply, service, pricing, or access will change after closing.
Practical fix: Collect supplier and service agreements, invoices, pricing schedules, renewal dates, and contact details. Note which vendors are essential and whether an agreement can be assigned. Make sure the buyer can see what is documented, and what still needs confirmation.
10. AGING EQUIPMENT AND DEFERRED PREMISES MAINTENANCE
Buyer reaction: “What will I have to repair or replace right away?”
Worn equipment without service records, a leaking roof, neglected plumbing, or a long list of small repairs can make a business look riskier than it is. Buyers may assume the visible problems are only the beginning.
Practical fix: Create an equipment list with ownership, age, condition, warranty information, and available maintenance history. Arrange routine servicing and address safety or reliability issues. Walk through the premises and handle practical repairs you can complete before a sale. If an item needs replacement, get an estimate and be transparent about its condition.
11. NO WRITTEN PROCEDURES OR PASSWORD HANDOFF PLAN
Buyer reaction: “Will the business function if the owner is no longer here?”
If you are the only person who knows how to open, close, order inventory, manage customer accounts, or access the company’s systems, the buyer may see the business as dependent on you.
Practical fix: Write short, useful procedures for recurring tasks. Make a secure inventory of business accounts (such as email, software, payment systems, and vendor portals) and identify who controls each one. Use secure access practices and plan how ownership and permissions will change at closing. Never put sensitive passwords in an unsecured file.
12. UNRESOLVED DISPUTES OR LIENS
Buyer reaction: “What obligation could follow the business or reduce the money I receive?”
A dispute with a customer, landlord, vendor, or employee can create uncertainty. A lien may also affect equipment or other assets a seller expects to include in a transaction.
Practical fix: Gather notices, legal correspondence, payoff statements, and agreements. Speak with your attorney, accountant, lender, or other relevant professional about what can be resolved and what must be disclosed. The California Secretary of State’s UCC information explains that searchable filing records may include financing statements and certain lien notices. A qualified advisor can help determine which searches or releases apply to your situation.
SMALL FIXES. STRONGER CONFIDENCE.
These issues are not all expensive projects. Often, the first step is a call to your accountant, a renewed permit, a written procedure, a documented agreement, or a maintenance visit.
The earlier you identify the gaps, the more time you have to address them without disrupting a sale. That preparation also helps buyers understand what they are acquiring, and can protect you from avoidable surprises during due diligence.
Owners preparing to sell in Indianapolis and across California face the same basic buyer question: Can I verify the business and take it over with confidence? A strong exit strategy for business owners answers that question with organized records, clear operating details, and fewer unresolved issues.
If you’re wondering how to sell a business and where to begin, start with a clear picture of your company today. A business valuation in California can help you understand where you stand and which improvements deserve attention first. For small business valuation services and sale guidance, I’ll explain the details in plain language and help you prepare for the next step.
Work with a business broker in California who understands how buyers evaluate risk and readiness. If you’re searching for business brokers near me, make sure you find an advisor who will answer your questions, protect confidentiality, and guide the process step by step. Learn more about our business brokerage California services.
Get your free, sale-focused valuation before you decide what comes next. Request a valuation, schedule a conversation, or contact David for a confidential, no-pressure discussion about your goals.
ABOUT DAVID
David Mayfair is a Business Sales Advisor at SD Business Advisors. David Mayfair and his team have sold over 850 businesses since 2007. He learned about the industry when he became a business buyer in 2000. He offers a free, sale-focused valuation and a confidential, no-pressure process. Contact him at 650-304-1138.
