Selling your business is a complex undertaking that requires many skill sets to maximize the amount you walk away with at closing. This is not a “do-it-yourself” project. The stakes are too high and it’s unlikely that you are the best person to do all the things that need to be done. The best advice is to put together a team. And the first person you draft should be an experienced and trusted CPA. The right CPA is not a mere number cruncher, but an experienced and skilled professional who knows how to advise small businesses on additional ways to add future value to where they are today. Their training and skills go beyond mere debits and credits. CPA’s have a whole range of specialized knowledge that can help you analyze costs, margins, and profitability, evaluate performance of teams and processes, as well as identify operational inefficiencies. All of this can help you run your business more effectively while adding long-term value at closing.
Your CPA is your expert on your numbers. You should be reviewing your financials regularly with your CPA. An experienced CPA asks you how your business works and where changes can be made in order to understand what generated the numbers and how they can be improved. Your CPA’s special education, experience, and insights can help you identify trouble before it hits and potential hidden opportunities as they appear. Beyond basic financials, your CPA can provide you with or advise your internal team on creating additional key reports like:
• 13 week cash projections
• Monthly budget to actual variance reports
• Product/service line margin analyses
• Three to five year pro forma projections
Your CPA can help you understand how to use these reports to build value buyers will want to buy. These reports and, more importantly, the discussion you will have with your CPA about them, will help add real insight and bottom line value to your business. All this helps you now – and helps you maximize your price at the time you sell.
Your CPA will have additional ideas to help you build value in your business. In the hundreds of sales of family-owned and closely-held businesses I’ve seen, the business owners that got the best deals always had a CPA who worked with them closely. Those business owners knew their numbers better, had a tighter control of their operations, and consequently were more attractive acquisition candidates. The CPA was the common denominator. If you don’t have a CPA, get one.
In addition to assisting you as you build the value of your business over time, your trusted CPA will be a key advisor as you begin to position yourself for sale. Most buyers expect or prefer to see your financials come from an outside CPA. This external, licensed preparation gives the buyer greater comfort that your financials have been prepared appropriately and accurately. Your buyer will generally attempt to project the future results of your business to help them assess the future value of it after purchase. As the buyer goes through this process, your CPA will be very helpful in providing the buyer with explanations of the numbers that will most accurately reflect your businesses potential. Your CPA will also help minimize and explain period over period distortions in your numbers that can occur with any business.
You should use your CPA as a consultant to help you put together your team as you chart the future course towards selling your business. Each member of your advisory team should have experience in buying and selling businesses. For example, if your tax pro only does 1040’s, they are not the right tax pro for advising you on the tax consequences of selling your business. Same with your attorney. Using a family lawyer to review your purchase agreement is like asking your dentist to take out your gall bladder. The right attorney is a business attorney who seen a good number and wide variety of small business sales. Your CPA will have suggestions and referrals for filling out the rest of your team and help you identify who will bring additional value to your business and the process of selling it: a business coach, business broker, valuation experts, etc. (get my entire white paper for more details on these team members).
Bottom Line: As you build your business, you need a CPA as a key member of your team. If you need a recommendation, Walker Law PC would be happy to provide you with one.
John H. Walker