How saving a little on taxes now could cost you big when it's time to sell
Let’s be honest—most of us know a business owner who’s blurred the line between personal and business spending. Maybe they’ve:
- Picked up groceries or a family dinner with the company card
- Run their own and their family’s auto expenses through the company
- Written off a beach vacation because of one client meeting while there
- Had home renovations billed to the business
- Snuck personal shopping onto the business account — $500 at Costco for “supplies,” sound familiar? 😊
It’s more common than most people like to admit. And on the surface, it might even seem like a smart move. After all, if you can write off a personal expense as a business one, you’re essentially getting a 20–30% discount, thanks to tax savings.
But what many business owners don’t realize—until it’s too late—is that this strategy can seriously hurt the value of your business when it comes time to sell.
The Hidden Cost of “Tax Perks”
As business brokers, we have this conversation all the time with owners who want to sell for top dollar. And we always say the same thing: we wish we could jump into a time machine, go back three to five years, and tell you to stop running personal expenses through the business.
Why? Because buyers base their offers on earnings. If you’re running $50,000 worth of personal expenses through the company each year, you’re not just lowering your tax bill—you’re lowering your sale price. When businesses are valued at 2.5x, 3x, or even 4–5x earnings, that $50,000 could translate to $125,000–$250,000 (or more) lost at the closing table.
That’s a steep price for short-term savings.
Clean Books = Higher Offers
Even if you try to add those personal expenses back in during the sale process, it’s not always clean—or convincing. Yes, we can make reasonable add-backs, but banks don’t love it. Lenders are going to scrutinize the numbers, question the value, and in many cases, reject some of those adjustments. No matter what you can “prove” on those personal expenses, many times those just do not fly with a bank that is valuing the business and underwriting a loan for the buyer.
Buyers, too, get skeptical. Think about it—if you were in their shoes, wouldn’t you wonder: What else are they not being honest about?
Suddenly, what could’ve been a smooth, high-value deal turns into a negotiation filled with doubt and discounted offers.
That’s why we give the same advice to every business owner who’s even thinking about selling in the next few years:
Start running your books squeaky clean—today.
Start running the great business you have built like a great business. Like a real business. No personal expenses through the business. Yes, it might mean paying more in taxes right now. But with earnings being multiplied by 2.5x to 5x in a sale, the long-term payoff is well worth it.
Tax Minimizer vs. Tax Evader
There’s a big difference between being smart about taxes and being reckless. Great business owners work with their CPAs to take full advantage of legal deductions, defer income when appropriate, and plan ahead. That’s tax minimization—and it’s good business.
But charging personal expenses to the company without any documentation or justification? That’s not planning—it’s tax evasion.
Even if the IRS never flags it, a serious buyer almost certainly will.
And when they do, it signals poor financial management, a lack of transparency, and potentially risky business behavior.
Final Thoughts
If there’s one message we try to drive home with owners preparing to sell, it’s this:
The financial habits you build today will shape the offer you get tomorrow.
That “harmless” personal expense today might cost you hundreds of thousands when it’s time to exit.
So clean up your books. Keep personal and business spending separate. Run your business like someone’s going to buy it—because someday, someone will!
Curious how your financials would look to a buyer? Or just want to start preparing early? Let’s talk. A 15-minute conversation could save you a six-figure mistake.
Contact Patrick Bombardiere at Transworld Business Advisors, patrick@tworld.com, 303-929-9219 to talk more about the value of your business.