7. The essential financials.

What financials are essential for a fair market valuation

When it comes to valuation, buyers want more than just a profit figure. They want to understand how that profit is generated, how reliable it is and whether it can be sustained without the current owner in place. For Dave, that meant moving beyond basic accounts and preparing a clear financial pack that answered those questions.

With support from RegenerationHQ, Dave pulled together three years of financial statements that were clean and consistent. He worked with his accountant to remove any personal or one-off items that distorted the true earning power of the business.

These adjustments—known as normalisations—gave a clearer view of underlying performance.

Essential financials included:

• Profit and loss statements, ideally on an accrual basis

• Balance sheets showing assets and liabilities

• Cash flow statements and cash position trends

• Breakdowns of revenue by product, service and customer segment

• Normalised EBITDA (earnings before interest, tax, depreciation and amortisation)

• Commentary on any large variances or unusual items

Buyers also expect clear records of stock levels, any finance arrangements, lease commitments and employee-related liabilities. The more consistent and transparent the financials are, the less room there is for doubt or discounting.

For Dave, getting these right was the foundation of a strong exit. It gave him confidence in the valuation conversation and made the business easier for buyers to understand and trust.

Cleaning up reporting and forecasting

When Dave first looked at his reporting through a buyer’s lens, he realised just how much of it had been built around his own way of working. Some reports were handwritten summaries. Others lived in spreadsheets with no backup. Forecasting was based more on gut feel than formal process. It had worked for him, but it would not work for a buyer.

With help from the RegenerationHQ team, Dave began to rebuild his reporting so it could stand on its own. That meant aligning everything to a standard structure, making reports easier to follow and removing any quirks that relied on his knowledge to interpret. They introduced a monthly reporting rhythm, cleaned up chart of accounts entries and worked with the accountant to automate regular reports.

Forecasting was a bigger shift. Dave had to move from short-term reactive thinking to structured forward planning. They built rolling forecasts based on actual trends, upcoming contracts and realistic market assumptions. He learned to back his forecasts with evidence, not optimism.

This clean-up made a real difference. It improved internal decision-making and showed potential buyers that the business was well run. It also helped Dave feel more confident. For the first time, he was not just hoping the numbers told the right story. He knew they did.

Understanding value drivers in manufacturing

For a long time, Dave thought value was mostly about profit. If the business was making good money, it would attract good buyers. But as he worked with John and the RegenerationHQ team, he came to understand that value in manufacturing goes deeper. Buyers are not just buying cash flow. They are buying what creates and protects it.

The first key driver was margin consistency. In manufacturing, fluctuations in input costs, waste or labour efficiency can have a big impact. Dave needed to show that his business had systems in place to manage these variables and keep margins steady over time.

The second was production reliability. Buyers look at downtime, quality control and capacity. If output depends on a single machine, or worse, a single person, that’s a risk. Dave’s plant was well maintained, and his team was cross-trained. That reduced reliance on any one piece of equipment or role.

Customer concentration was another factor. A business with one or two large customers carries more risk than one with a spread of smaller accounts. Dave worked with the team to show the strength of his client base, including contract terms, order history and relationship depth.

The final driver was scalability. Could this business grow with minimal capital investment? Could it handle a bump in orders without breaking its systems? By mapping this out clearly, Dave made the business more appealing to buyers looking for future upside.

Understanding these drivers helped Dave shift his focus from just presenting results to showing how those results were achieved—and how they could continue without him.

Building a data room for buyers

Once Dave had cleaned up the numbers and understood what buyers would want to see, the next step was to organise that information in a way that made the process smooth and credible. That meant building a data room—a structured, secure folder that holds all the key documents a buyer will need during due diligence.

With guidance from RegenerationHQ, Dave set up a digital data room that could be shared with serious buyers at the right time. The goal was to make it easy for them to find what they needed without delays or repeated requests. This also showed buyers that the business was prepared and professionally managed.

The data room included:

• Three years of financial statements and supporting schedules

• Revenue breakdowns by customer, product and region

• Normalised EBITDA calculations with clear explanations

• Forecasts, budgets and strategic plans

• Copies of key contracts with customers and suppliers

• Lease agreements, insurance policies and asset registers

• HR information, including organisational charts, contracts and leave balances

• Legal documents, such as company constitution and shareholder agreements

• A list of intellectual property and trademarks, where applicable

Dave was surprised how much confidence this created. When buyers could see everything clearly and quickly, they asked better questions and moved faster. The process felt less like an investigation and more like a professional transaction.

Building a strong data room turned out to be one of the most powerful tools in the exit process. It gave Dave control over what was shared, when, and how it was framed.

Using the numbers to tell a growth story

Dave had always looked at the numbers as a report card—something that showed what had already happened. But through his work with John and the team at RegenerationHQ, he started to see them as something more. The numbers were not just about the past. They were the foundation for a believable and compelling growth story.

Buyers want evidence that a business has room to grow and the ability to deliver on that growth. It is not enough to say the business could expand. The financials need to show where, how and why. Dave worked with the team to pull together figures that supported a clear forward path.

They looked at trends in repeat orders, lead conversion rates and cost improvements. They mapped out opportunities to expand into adjacent markets or increase production with only minimal capital investment. They also built financial models showing what would happen under different growth scenarios—adding one new customer segment, investing in automation, or shifting the product mix.

The aim was to show that growth was not just possible but planned and supported by the current performance. This helped shift the buyer’s focus from risk to potential. It also gave Dave a stronger negotiating position. He was no longer just presenting what the business had done. He was showing what it could become.

The numbers became more than reports. They became a roadmap for the future. Ps. They want to believe them.

Talk to us about your exit journey. www.regenerationhq.co.nz/contact