Think Like a Buyer: Presenting Your Software Company’s Financial Statements

When you’re getting ready to sell your business, one of the first things buyers will ask for is your financial statements. Sure, topline revenue and profit trends matter, but buyers are digging deeper. We want to know the nuts and bolts of how your business runs. If you structure your financials with a buyer's mindset, you’ll not only cut down on the back-and-forth questions but engage the right buyers.

Here’s what to think about when you’re preparing your financial statements:

1. Separate Your Revenue (and Cost of Delivery): Recurring vs. One-Off

Buyers love predictable, steady revenue. Recurring income—like subscription fees or service contracts—signals reliability. One-off revenue, like consulting or setup fees, can still be valuable, but it’s not seen as stable.

Separate these revenue streams clearly. Buyers want to see how much of your business is built on consistent, repeatable income. Do the same with your cost of delivery—aligning costs with the revenue they’re tied to gives a clearer view of your margins.

2. Get Your Gross Margin Right

Gross margin is one of the first things buyers will look at to understand how your business is performing. For software companies, make sure your Cost of Delivery includes all the right components—hosting costs, third-party fees, customer support, DevOps, and any directly related salaries.

If you sell hardware, use accrual accounting to align costs with the revenue they generate. Buyers want to see accurate margin trends over time.

3. Be Transparent About Salary Expenses

Capitalising development-related salaries can make things look good in the short term, but it doesn’t show the full picture. Transparency is key—we want to see salaries and development costs expensed as they occur. This helps us assess your ongoing profitability without hidden surprises.

You can still bucket development costs separately to show where you’ve been investing. This helps buyers distinguish between regular operating costs and growth-focused spending.

4. Call Out Foreign Currency Adjustments

If you’re operating internationally, foreign currency fluctuations can throw off your financials. Buyers need a clear view of how these fluctuations have affected your performance. Listing foreign currency adjustments as a separate line item keeps things clear, so we can focus on your core business performance.

5. Adjustments to EBITDA

This is the time to adjust for one-time expenses or recurring adjustments (like personal expenses) that are on the P&L. Make sure it’s clear that these are adjustments in your presentation, sitting under the EBITDA line.

Adjust for things like one-time legal fees, restructuring costs, and align owner salaries to market rates.

Be mindful of addbacks—they need to be reasonable. Overdoing it could make buyers question the rest of your financials.

Wrapping It Up

The more straightforward your numbers are, the smoother the sale process will be.

At Continua Software, we’re actively buying companies like yours. When you’re ready to take the next step, give us a call.