A set of organized, accurate and believable financial statements will have more influence on a buyer than anything you say, do or promise.
If you don’t already have a system in place for tracking your company’s finances, begin now to set one up.
Many small businesses (and most single proprietorships) get by with off-the-shelf software like Quicken. But I would recommend that now is the time to hire an accountant – and preferably a CPA. Here’s why:
• A CPA with small business experience may be able to immediately lower your taxes by enough to offset his fees.
• There will be new tax issues created by the sale of your business, making your CPA’s advice and expertise even more valuable.
• Buyers will trust your financial statements much more if a professional has assembled them. And your financial statements will only help sell your business to the extent the buyer trusts they are accurate.
• The Buyer will likely have a professional working for him – a trained accountant who will be examining your statements for accuracy and legitimacy. If you don’t have a professional on your side, you may be at a distinct disadvantage when negotiating any points that center on your company’s finances.
The 3 Types Of Financial Statements
Compiled Statements: Here the accountant simply compiles and organizes the information you provide. But the accountant will not test the accuracy of your information and will not vouch for the statements.
Reviewed Statements: Here the CPA goes one step further and takes your compiled statements and compares the numbers to averages or norms in your industry. Profit margin, return on equity or any other metric that is important in your type of business would be included.
If you compare favorably to your industry’s averages, this will certainly be something you can point out to buyers. If you compare unfavorably, at least you have identified weak areas that you can address and improve.
Audited Statements: If you decide it is worth paying for audited statements, then your accountant will take the needed time to test the accuracy of the numbers you have provided. Some of the tasks the accountant may perform are to inspect a random sample of accounts receivable for their legitimacy or conduct an actual count of the inventory in your store or warehouse.
While buyers will prefer to see audited statements, most sellers decide they are not worth the extra expense. For most businesses, Compiled Statements will be adequate.
Since the financial statements are the first thing that buyers look at in a company, poorly prepared or inaccessible financials, will tend to make the buyer lose his interest in the company.
It makes sense for all small business owners to learn what’s involved in increasing the value of a business. To make this easy for you we’ve developed a FREE workshop that you can access HERE
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