Tips and Thoughts About Buying or Selling Your Business
Thinking about expanding your business through an acquisition - or selling it because of retirement, market conditions or to reach the next stage of growth - can feel overwhelming. As a business and finance attorney, over the years I’ve worked as both general counsel and M&A counsel for companies of all shapes and sizes, and I’ve seen firsthand what helps an owner get ready for a successful sale (and what can unintentionally get in the way). Through this Q&A series, I will share practical, real‑world advice from those experiences, so whether you are buying or selling, you can navigate the process with fewer surprises, and greater clarity and confidence.
Q: I am thinking about selling my business within the next two years. What should I be doing in order to be prepared to sell?
A: The good news is that you are thinking ahead. This will give you a good amount of time to prepare your business for that eventual sale. Most buyers will focus on price and value. But to be ready, you need to be sure that your business house is in order. That means that you have well-developed internal financial reporting controls that will help you and a potential buyer easily identify expenses and profitability.
A good accountant can help you with creating your internal financial controls and help you to understand the preferred ways you can track financial performance. So, you should evaluate your accounting professional and determine if he/she has the skill set to assist you during the M&A process.
It can often be difficult to assess whether an accountant has the necessary skills and experience to help you prepare for your sale. The best way to evaluate an accountant is to interview several so that you can determine if they understand Generally Accepted Accounting Principles (GAAP). Most financial buyers will apply GAAP in their analysis of your company. Your accountant should be conversant with GAAP standards and be able to identify where your internal financial reporting is consistent or inconsistent with GAAP. A good accountant will also be able to help you fine tune your internal accounting methodologies and processes to make your business more attractive to a buyer. If your financial reporting is not up to par, that accountant can help you implement systems.
A skilled buyer can quickly recognize financial reporting weakness and may take advantage of you during the courting period and the valuation discussion and negotiation if you are not well represented. A company in good order can bring higher valuations because it helps a company present its operations and financial results in a more professional and polished package.
Many buyers will undertake a quality of earnings evaluation (Q of E) of your business. Having an accountant who can respond meaningfully to a Q of E report could result in a more favorable business valuation at the time of sale.
The best way to compile a list of potential accountants is to seek recommendations from your current counsel, your financial advisors or other business owners that you know who have gone through this experience. Additionally, there are numerous professional rating agencies that can direct you to qualified accountants in your area.