Last week we talked about some of the major pitfalls that business owners face when looking to sell their business. This week we’re going to continue with that theme and discuss one of the major factors that can be either a deal-maker or a deal-breaker when executing the sale of your business. This factor is your ability to provide accurate financial statements and records to a prospective buyer.
When a buyer, investor, or lender is evaluating your business, having reliable financial information plays a major role in the risk profile that they are taking on when making the deal, and therefore is a driving factor in the value they see in your business. Undoubtedly, financial performance is a driver in determining what they are willing to pay for your business, but the reliability in the details behind the stated financial performance is equally important to any buyer as a part of the due diligence process. There are a few key questions almost any buyer and their representation will consider when evaluating your business:
- Are the financial statements clean and believable?
- What accounting processes have been put into place to ensure the accuracy of your records?
- Do the financial statements tie to the tax returns in an easy to understand fashion?
- Can you explain the details behind the numbers driving the key performance indicators in your business?
- Are the financial statements consistent and easy to track from year to year?
- Is there a consistent, multi-year track record of the financial performance of the company?
We know that for most business owners maintaining the books and ensuring their accuracy is not your favorite part of running your business or why you started the business. However, they are a major aspect of the value that you can generate in the sale or transition of your business. Because of this, and the need for a proven track record of accurate books, we believe now is the right time for any business owner to evaluate their bookkeeping processes and consult a professional. You need to ensure you receive the value you deserve when you do decide to exit, so don’t hesitate in contacting us today.