Selling your company is never an easy decision and a process not often understood. Preparing the company to be sold begins long before the decision to sell, though far too few owners realize this and subsequently, may receive a lower valuation and extend the process.
While there are many reasons an acquirer is attracted to purchase a company there are fundamental practices that will enhance the value perceived by the acquirer. Think of this as curb appeal when selling your home.
Increasing curb appeal can increase costs within a company, but with the opportunity for higher exit valuation.
Among the first areas examined by a potential buyer are the financial records and management team. Engage a CPA firm to perform an annual audit of your financial reports.
The expense of an audit can be greatly reduced by a few basic practices.
- The monthly close should include all the year-end schedules required by the auditor. Don’t leave audit preparation until year-end.
- Communicate with your accountant throughout the year any significant issues and agree how they will be presented.
- Instill within the organization the expectation all transactions will be captured and reported monthly in accordance with GAAP.
Auditor confidence in internal controls and timely completion of audit requests impacts the cost of the report.
Reliable and consistent financial reporting avoids unpleasant surprises when negotiating the sale of a company.
Top grade your management team developing them into a self-directed team. A one-person show can be averse to valuations and it certainly limits company growth. Key positions need to be clear drivers to the organization. This will also benefit the management team as the new owners most likely will see their value going forward in the new organization.