While larger businesses often forge close relationships with their accountant, outsourcing all financial services, many small-business owners only consult an accountant when it’s time to submit their tax return. But whether your accountant is an integral part of your team or delivers a once-a-year service, it pays to have them onside in the run-up to selling your business.
Planning for Success
Any serious buyer will be looking for accounting records that are not only in apple-pie order but that clearly substantiate your business’s value; if anything is amiss here, buyers will be wary of committing and may even look to lower the asking price.
Instruct your accountant in the early stages of the selling process and you can get ahead of the game by setting or substantiating your selling price, preparing paperwork for review and setting the stage for any due diligence you need to carry out further down the line. A good accountant will also be able to liaise with the buyer’s accountant as negotiations progress and will offer advice on how to best structure your sale to minimise tax liability.
Getting the Price Right
Do you know how much your business is worth? You probably have an idea of how much you’d like to gain from a sale – and there are plenty of formulae to help you arrive at a ballpark price, including using a multiple of profits or an asset valuation, or an online calculator like.
But an accountant will be able to help you fine-tune your price via a comprehensive evaluation of your assets and liabilities and by detailing what will be included in the sale (brand, website etc). They’ll also be able to build a picture of your income over time and assign value to your past earnings, cash flow and balance sheets, as well as any overlooked liabilities.
Structuring the Deal
A sale can take many forms, including an acquisition by a larger competitor or by a shell company. It can also comprise of a variety of aspects – assets like intellectual property, buildings and equipment or company shares, for example. During the ‘Heads of Terms’ stage, the accountant will draw up a prospectus, outlining the agreement and projecting timescales.
Your accountant should be able to outline the pros and cons of various options and will detail exactly what your responsibilities are in any given scenario, so you’ll know where you stand. Although your solicitor will lead the legal process, a strong client-accountant relationship will make the whole process run a lot more smoothly. They’ll also be able to advise on the tax implications of making adjustments to the sale price, which could save you time and money in the long run.
Before even listing your business for sale, you should seek your accountant’s advice on due diligence: are there any assets, practices or liabilities that could impact either the saleability or price of your business and, if so, how can you mitigate them? An objective opinion from a trusted professional will cut through the emotional aspect of selling your business and provide a sounding board for your concerns.
Your accountant can also investigate your potential buyer’s credentials, examining their strategy and evaluating whether or not they can afford to go through with the deal.
Moving to the Next Stage
Whether you’re looking forward to retirement or using the sale to springboard to your next business opportunity, you’ll need to do some planning. An accountant can help you to start thinking about your next steps, advising on options for reinvesting or referring you to an independent financial advisor (IFA) for other further advice.