Financial health
The first thing a buyer's accountant looks for, and the pillar that sets the ceiling on every other one. Clean books, real margins, and numbers that survive a quality-of-earnings review.
The film
What a buyer's accountant reads first
The four elements behind books a buyer trusts: Clean Financials, Gross Margin, Overhead Efficiency, and Predictability. What the gaps look like in a $3M to $30M business, and where to start.
What buyers measure
- Accrual financials, reconciled monthly, with a clean audit trail
- Normalized earnings: add-backs a quality-of-earnings review will accept
- Gross margin and overhead trends over three years, explained
- A forecast the last three years make believable
What good looks like
- Books closed within fifteen days of month end
- Gross margin stable or rising while revenue grows
- Owner compensation and personal expenses separated from the business
- One set of numbers: the tax return, the management accounts, and the pitch agree
Where owners fall short
- Cash-basis books that hide timing and margin
- Add-backs no reviewer will accept
- Margins only the owner can explain
- A forecast built on hope rather than pipeline
The numbers that move it
What gets measured on this pillar
Gross margin
Trend over three years
EBITDA margin
Normalized
Days to close the books
Target: fifteen
Forecast accuracy
Last four quarters
The elements behind it
4 of the 36 FNDRS Elements®
The score on this pillar is the sum of these. Each opens its own entry.
All 36 elements- Cf11 · Clean FinancialsAccrual books, reconciled monthly, that survive a quality-of-earnings review.
- Gm06 · Gross MarginRevenue left after direct costs; the ceiling on everything below it.
- Oe08 · Overhead EfficiencyFixed costs held flat as revenue scales.
- Pd12 · PredictabilityForecasts that come true; a pipeline a buyer can underwrite.
6 minWhiteboard session
Ashley on predictability
Ashley works through this element as in an FNDRS workshop: what a buyer is really asking, how the score moves, and the first thing to fix.
Ashley SmithCOO
How FNDRS moves it
Advised, tracked, and re-scored
A fractional CFO read of the books in the analysis stage, then a monthly close cadence with your advisor until the numbers hold on their own.
- In the processValuation and analysis in the FNDRS process
- In the platformValuation tracker
- ToolsGet your exit score
Questions
Owners ask
Rarely for a founder-led company. You need accrual books that reconcile and a quality-of-earnings review you can pass. That is a matter of discipline, not an audit fee.
Owner compensation above market, one-time costs, and personal expenses run through the business, each with documentation. Recurring costs dressed up as one-time are the fastest way to lose a buyer's trust.
Where do you stand on financial health?
The exit-readiness score gives this pillar a mark from zero to one hundred and the three gaps worth closing first.