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Understanding the complexities of business sales can often feel like navigating a ship through uncharted waters. As accountants and advisers, our responsibility goes beyond simple number-crunching; we want our clients’ businesses to stand out when it’s time to enter the market. I recently had the pleasure of co-hosting a webinar with Dru Morgan from Morgan Business Sales. During the webinar, we explored the factors that distinguish a business and help it attract the right attention in today’s crowded market.
Whilst we covered a lot of ground during the webinar, we discussed some key points that remain relatively constant across industries and business sizes, starting with ‘preparing for sale’. You wouldn’t sell a house without a bit yard work, touching up some dodgy paint work, and some basic staging, right? The same goes for businesses. Depending upon the timeframe available, there are some quick ‘cosmetic’ touches you can make that will immediately improve the ‘curb appeal’ of the business, whilst other improvements may need a more considered and long-term approach. It’s about understanding the competitive landscape and getting all your ducks in a row through a detailed review—almost like conducting your own due diligence—to pinpoint exactly what makes this business tick and where it can shine brighter.
Understanding the starting point is obviously crucial, meaning valuing the business, warts and all. This isn’t just about putting a price tag on it; it’s about uncovering the potential and perhaps what might be holding back the business, so that ,with a little forethought and planning, could pay massive dividends come time for the business owner’s exit. Once we know what we’re working with, we need to develop a strategy to maximise the value and reducing the sticking points that might make a buyer hesitate.
The strategy of standing out can be broken down into three key focus areas: growth, financials, and risk. For growth, let’s skip the guesswork and stick to marketing that’s proven its worth. If your timeframe for exit is a short one, now is not the time to experiment with weird and wonderful new marketing strategies. Keep the business consistent if you cannot achieve improved growth. Financial transparency is absolutely critical; the cleaner the books, the fewer adjustments needed, the better. Many a prospective purchaser will be scared off by a vast schedule of profit add-backs that need to be scrutinised, examined, and proven before they can rely upon your accounts. And risk? It’s all about reducing it to sweeten the deal. Lower risk equals higher valuation, plain and simple. Some examples of business risk reduction will be the reduction of reliance upon the owner – the owner cant exit if they are critical, or documenting systems, procedures, and internal controls. A business that essentially comes with a operating manual is the dream!
A pro tip: do your due diligence before anyone asks for it. Get everything a buyer might want to know organised and ready to go. This not only speeds up the process but also puts you in the driver’s seat during negotiations. Nothing says ‘prepared’ like having all your files sorted at the click of a button. Having these on hand before you are ready to go to market makes your broker’s life easier and gives your client the best chance of a successful (and lucrative) sale.
The partnership between accountants and brokers isn’t just helpful; it’s essential. Whilst accountants reassure, guide, assist with compliance, crunching the numbers and advising on the best tax positions, deal structures and the like, brokers like Dru are the market mavens. They know the ins and outs of buyer behaviour, what’s hot, what’s not, and how to pitch your business to get the best possible offer.
So when should you involve a business broker? Sooner rather than later. Ideally, years before your client is ready to exit. Early planning pays off handsomely. It means more time to adjust strategies, more time to enhance appeal, and ultimately, more time to find the perfect buyer. By always being ready for market, the business owner is in the enviable position of being able to press the button on the sale at the time that best suits them and when the market is at its best.
It’s essential to ensure that information flows seamlessly between the accountant, broker, and client. Transparency about financial histories and tax details is crucial and can significantly impact a deal. Maintaining open lines of communication not only facilitates the transaction but also contributes to crafting a narrative that potential buyers can trust. As an accountant, it is important to foster solid professional relationships with business brokers to assist your clients in achieving their best possible exit.
If you want to better understand yours or your client’s business value, including the associated risks, start your valuation today or sign up for BVOPro!
