Incredibly, the average accountant loses up to 20% of their client base due to a sale or closure each year. How often have you been told out of the blue by a client, that they have sold their business and the transaction completes next week? Often negating the value you could have offered to the sale.
Having been involved in thousands of business sales, from local cafes and convenience stores to multi-million pound transactions, there is one consistent theme in a successful sale - the accountant.
There is a reluctance from some practicing accountants in refering or advising a client on the sale of their business. For some, it may be to prolong the (previously) inevitable loss of a client, and for most, simply being cautious of the traditional brokerage market which offers very low value to your clients, charges high fees and has very low success rates.
With the changing dynamic of accountants being seen as much as a business advisor as an accountant, there is a real opportunity for practicing accountants to add great value to their service. There are also fee earning opportunities abound and the ability to retain existing businesses once sold.
What is actually being sold?
Many small business owners don’t quite understand what is being sold. Should it be an “asset sale” or a “share sale” are some of the many considerations. Through an accountant, the client can understand exactly what is for sale, and therefore plan better for success.
Preparation drives success
I’ve seen businesses sell with zero trading history through to 100 year old family firms which have archaic bookkeeping and forecasting. Either way, had these business owners invested and engaged their accountant to help overlay these gaps, they would undoubtedly have driven a greater sale value.
Business buyers look for financial cleanliness and honesty as their top priority when buying a business. Many small business purchases are emotional investments, so even a declining business or a poorly operated one can sell successfully if presented well.
By helping your client to present their financial trading position as clearly and healthily as possible, you will be adding tangible value to the sale.
How can accountants help value a business?
The topic of business valuations is very subjective. There are numerous methods, from discounted cash flow to multiples of profit. Of course, many larger acquisitions are made on wild multiples that only those who see the clear synergies can understand.
However for small businesses, the simple process of using known completed sale values to estimate an achievable valuation is the best method. At Bizdaq, we have built a valuation calculator online which uses top level financial and geographic data to provide this insight, for free.
The need for a trusted advisor such as an accountant, to temper the aspirations of a business owner when considering value is key. Many businesses that come to market are overvalued, however when an accountant is involved in ensuring there is a realistic expectation on sale value, the chances of successfully selling increases significantly. Your client trusts your judgment, and your assurance can be the difference between success or not.
Objective due diligence
In most cases, the buyer of any business will have many questions surrounding the financial performance. I have seen many business owners cobble together responses which often draw even more questions from buyers than they do provide answers.
For some small business owners, having what can be seen as intrusive questions about their business can be spark an emotional response. An accountant can ensure the responses are well measured, objective and clear.
With the multiple ways a business sale can be structured, I have seen small business owners lose thousands from their retirement fund because they didn’t speak to their accountant before sealing the deal.
Your ability to ensure the sale structure is in the best interest of your client is critical. As the accountant, you have the capability to add thousands (sometimes tens of!) if you are involved from the outset.
At Bizdaq, we’re delighted to launch our partnership with the ICPA, and our award winning online platform can help sell your clients business for a low fixed fee.
As part of our partnership, we’re delighted to launch the ICPAhub as part of our platform, which provides up to date market insight, expert knowledge and direct live support for ICPA members who are wishing to help their clients buy or sell a business.
Posted on September 14, 2018 | Accountants
By Sean Mallon