Due Diligence Pays Dividends.
What your accountant
can and can’t help with when
selling your business.
An accountant is a financial expert
and thus can be of great value to a business in a variety of ways.
This is especially true if you’re planning to sell your business, because at such times you will often require some specific financially oriented advice.
As important as this advice may be, it’s vital to appreciate that there are certain aspects of the selling process which require an expertise which extends beyond financial considerations alone.
So to help you enlist the help of other professionals when required, this article will discuss what your accountant can, and can’t, help you with when preparing to sell your business.
Arriving at the right value for your business
You may already have a fairly clear idea of how much you want your business to be priced at. But is this the same as its true market value? This distinction is important because any prospective buyer will scrutinise the figure in great detail. And if your own assessment of value is found to be inaccurate, any potential buyer is likely to lose confidence in the validity of other business information you make available.
Your accountant will be able to look at your business from a more independent perspective. Part of this procedure will involve choosing the business valuation method which is most appropriate for your business sector – e.g. a hotel business will not be valued in the same way as a building firm or a taxi service.
But even more important, your accountant will also assemble the facts and figures in order to create and support a professional analysis of the true value of your enterprise. What is more, the valuation will also look to present the business data in a manner which guarantees an outcome that will best serve your financial interests.
While such valuation will inevitably be the subject of frank discussion with a potential purchaser, you will be able to negotiate much more confidently if you can understand and relay the reasoning behind the final figure. Rather than losing face, such knowledge will help you gain the respect and confidence of any interested buyer.
Advise on tax liabilities
Any business sale you conclude will have tax implications: for your personal tax liability, for the business itself, and perhaps also for the new business owner – especially if that should happen to be another family member or the existing management team. And though tax and its financial implications should never be allowed to dominate how any deal is concluded, an accountant clearly has an understanding of the tax-revenue implications of certain sale outcomes.
So your accountant should be continuously in the loop during sale negotiations to advise upon the impact of certain deal structures. That will enable you to achieve your sale objectives in the most tax efficient way as you move to conclude the business sale.
Monitor due diligence from your perspective
Due diligence is performed by the buyer’s professional team and is based on information supplied by the seller. But in purely practical terms, as a wise seller you should ensure that some due diligence scrutiny of your business takes place well before it is listed for sale.
An accountant’s eye can be extremely helpful here. On your behalf, an accountant can interrogate the information to ensure that it is accurate and tells the story of your business to your best advantage. Whilst it would be unfair to suggest he merely arranges statistical data for your benefit, such expertise will help to put you on the front foot in any sale negotiations.
Your accountant’s ability to spot potential due diligence problems, and devise appropriate solutions (or at least mitigating strategies) may turn out to be even more important. No seller enjoys being asked awkward questions which are difficult to answer – especially if this means backing down on critical points during the sale negotiation.
Marketing your business
Your accountant is not in an ideal position to manage the marketing of your business. First of all, such an intervention may compromise his role as an independent financial expert in the broadest sense. While as regards the sale of your own business, being the person who guarantees the validity of the financial valuation and also the one who assumes responsibility for promoting the sale to other parties, would also compromise his unbiased standing.
Here, you should either take responsibility for the sale yourself, or preferably entrust the matter to a business broker with the relevant experience of your industry and a healthy list of contacts to locate a would-be buyer.
Your own post-exit strategy will also need to be planned. And whilst this will clearly depend upon your intended goals, your team of advisors can again offer invaluable assistance by explaining the implications of your projected plans, and maybe suggest a tweak or two which will work out to your advantage.
Make yourself dispensable
In many ways, leaving the sale details to other professionals fits rather well with another point you should consider: the need to remove yourself entirely from the day-to-day running of your business and any responsibility for future strategic planning. Would-be buyers are likely to claim your continued involvement is proof the business cannot survive without you – and will downgrade their valuation of your enterprise accordingly.
So, as your accountant will confirm, the best advice is: don’t give them that opportunity!
By Matthew Hernon is an Account Manager at Dynamis looking after Business Transfer Agents and Franchises across BusinessesForSale.com and FranchiseSales.com.