Accountant v Business Sale

My accountant’s biggest flaw

I like my accountant. She’s smart, steady and well informed. She consistently gives me sound advice.? But she’s human and she makes mistakes.

Here’s the biggest mistake she makes: she listens to me.

When I tell her what I want to do she does her best to help me achieve those goals. Unfortunately, she is not a mind reader, and it turns out I’m not good at sharing all my decisions. This problem is usually not a big deal, but if you might want to sell your business in the next 5 years, this problem could kill that opportunity.

Most business owners have thought about moving on from their business – but they never talk about it. Never. Who would they talk with? Employees? Watch the resumes flow off the office printer. Your bankers? You’ve just spent hours convincing them you are in this for the long haul!

It’s easy to see the risk (real or imagined) in talking to anyone about your desire to sell some day, so owners tend to keep that to themselves – not knowing that keeping it secret may eliminate their ability to ever achieve that goal.

Why? Because the success of almost every business sale depends on how your business has performed over the last three years, and your financials and taxes tell that story. Outside financiers (banks, finance brokers, etc.) will look at your last three year’s results and base lending to your buyer on those records. Even if you end up completely self-financing a sale, every potential buyer is going to be looking at your financials and tax returns in detail. What will they see?

What have you been telling your accountant to do?

More than likely your accountant listens to you. They hear you complain about taxes. They hear you talk about sheltering profits. “Help me lower my taxes”, you repeat constantly. So, they approach your filings with that goal in mind and give you tax returns and financials designed to show how little your business makes.

Now fast forward four years from now. You’re sitting across the table from a potential buyer (and their banker) and you’re talking as fast as you can about how the tax returns aren’t really “as bad as they look”. Your accountant gave you exactly what you asked for, and now that’s unintentionally put the sale of your business at risk.

“You want me to pay more taxes?” Maybe, or maybe not – that’s not the point. The point is that your accountant has skills and tools they can use to help you reach your goals. But they must understand your goals for that to happen. What if before you file this year you simply ask your accountant this question: how would we approach my taxes differently if I were thinking of selling my business 3 years from now?

Maybe they’d change nothing, but you might be surprised how a few small tweaks can dramatically improve your potential for cashing out in the future.

Reality limits what can be done to impact financials and tax returns, but every business owner knows that year end transactions can make a huge difference to how those realities are displayed.

My accountant has a flaw – she listens to me. Your accountant probably has the same problem. Do yourself a favour and tell your accountant: “I might like to sell my business someday – what should we do differently this year with that goal in mind?”