How to Sell Your Business: Get the Books in Order

Our Weekly Tip: How to Sell Your Business

We work with a lot of small business owners. We understand their needs, fears, and desires at a granular financial level. And one of the biggest things that many of them overlook and eventually come to feel anxious and scared about, is how to eventually sell their company. One of our recent editions of The Scoop covered how small business owners can retire while optimizing their financials and reducing their taxes at the same time.

But you don’t need to be retiring in order to sell your business. You may just be ready to be done, or you want to free up some of your financial resources for a different project. No matter your reason for wanting to sell your small business, one thing is more important than almost anything else: Getting your books in order.

What Happens When You Go to Sell Your Business?

No matter how big or small it is, when you start taking steps to sell your business, there are going to be multiple people looking into your history and financial records. Everyone from lawyers and accountants, to your prospective buyer, business valuation experts, and anyone else who becomes involved with the sale will want to take a look.

It can vary from transaction to transaction, but these people are most likely going to want to see a few years’ worth of tax returns and financial statements. They’ll also want to see your accounting for all company income during the same period. Basically, they want to get a feel for the business they are thinking of buying. Missing money or mismanaged records can be a red flag for buyers (and especially for their lawyers and accountants).

What It Means to “Get Your Books in Order”

Getting your books in order is a term that is thrown around a lot. But when you get down to it, what does it actually mean?

·??Standardize your accounting – As businesses grow, many of them go through different stages of accounting and accountants. It might start off with owners doing it themselves, then maybe having a friend or family member help, and then hiring a variety of different accountants over the years. Before you go to sell, you have to make sure your books are clear, easy to understand, and up to industry standards.

·??Have transparent cash flow records – Most businesses sell for about three to six times their current cash flow. This is a large range, but the final sale price will depend on the market and sales of similar companies. The point is, though, you have to present transparent records of money coming in a going out. If there is any confusion or errors, then you may scare off a buyer or not set your sale price high enough.

·??Cut expenses if you can – When it comes time to sell your business, you want it to look as profitable as possible. That means that once you decide you want to sell, take a close look at all of your expenses. If there is anything unnecessary, then cut it off. Most businesses have old, forgotten, or no-longer-needed expenses. If you can eliminate those, your business will look more profitable to potential buyers.

How to Prepare to Sell

As a business owner, a key strategy is to treat your books as if you may need or want to sell at any time. If you wait until it comes time to sell to clean up your books and search for records, then you’re bound to miss something or make an error.

By continuously tightly managing your cash flow, keeping extremely accurate records, handling accounts payable and receivable correctly, eliminating unnecessary expenses, and standardizing your books, you’ll be more profitable while you own the business and when you sell.

Have questions about how you actually can optimize your business for selling? You’re in the right place. Click here to schedule a call with me .

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? We Offer CFO Services

?Whether it’s optimizing your business to sell or just cutting your expenses to make your business more profitable, we can help. My team and I provide services that are customized to the specific needs of your company and your financial goals. Here are some of the virtual CFO services that we offer:

• ?Timely Financial Reports
• Staff Management
• Staff Training
• Budget Preparation and Monitoring
• Trend Analysis
• Tax Planning
• Organizing Books
• Cash Management
• And more!

See How You Can Optimize Your Business for Growth and Success ?

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? Tune In to Our Weekly CFO Scoop

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