You’re running a successful business, adding customers and sales like there’s no tomorrow. You’ve got capacity to take on more, and things are really humming. Soon you’ll be able to sell this company and move on to your next venture with the big money you’ll garner from the sale.
But it won’t be as much as you expect.
You see, during due diligence, things get uncovered. Just like an Indiana Jones excavation project, due diligence is designed to uncover issues – both good and bad – that the buyer needs to know in order to determine a fair price to pay. And if you have skeletons hiding in your numbers, your business value will decrease.
These skeletons typically take the form of less than perfect accounting practices which result in statements that don’t properly reflect the true financial position of the company. When this happens, your business value erodes in the buyer’s eyes.
The good news is that you can prevent these skeletons from piling up.
Here are three actions you can take now:
Get the accounting right.
If your books are a mess (your outsourced CFO can tell you if they are), then you need to upgrade to a bookkeeper who understands good accounting practices. No more messes, and no more unpleasant surprises that can cost you real money.
Having a strong understanding of accounting principles can, in fact, take you a long way in every stage of your business – whether you’re getting ready to sell or just communicating effectively.
Get the right people on board.
You can’t ask your landscaper to re-wire your electrical panel. So, you shouldn’t ask your bookkeeper to design and analyze metrics and trends and plan your business’s financial results and exit strategy – basically, the sale of your business.
Get the right tools in place.
Are you meandering through the year, just hoping that this month’s results will be better than the last? That’s like wandering through the wilderness without a map. You need planning tools to help guide your business. A budget, a strategic plan, a succession plan, an exit/transition plan – all of these tools can increase the profitability and value of your business.
This stuff happens in real life, by the way. When I work with a new client, we’re in cleanup mode all the way through the onboarding process. We do this to move them away from their basic cash-in, cash-out bookkeeping methods and help them cultivate good accounting practices that lend insight into the business – not only for the business owner, but for those who need good financial statements to make decisions. This includes the bank and vendors who aren’t willing to extend the amount of credit they need.
Overall, the goal is to give you options that enable you to grow your business, as well as paint a transparent and positive picture of your business’s value. This way, we make sure that no skeletons will pop out of your closet and scare away a potential buyer or supplier. Paying attention to the people, tools and accounting practices in your business will help you get the best value from it as you transition.
If you’re ready to dive in and supercharge the value of your business, give TurboExecs a call.