If you are going to sell your business, you want to get the maximum return from the sale, right? Unfortunately, many business owners who come to me for professional Exit Planning advice think that all they have to do is hand over their financial statements to prospective buyers, and amazing offers will start rolling in. They know the true value of their company, and know that the buyer will be getting a great bargain. Yet they soon discover that these prospective buyers are making extremely “low ball” offers. This can be so discouraging that many sellers withdraw their company from the market, thinking they must to wait until the economy recovers to get the return they desire.
When I look closely at their financial statements, however, it’s clear that the problem isn’t the economy – the problem is with the books. If, like many business owners, you manage your business with a view to minimizing taxes, then your financials probably show as little profit as possible. (See my previous post for a discussion of this.) You shouldn’t really be surprised, then, when you receive low offers from buyers. Yet, as I tell my clients, there are some ways that you, as a business owner, can “bulletproof” your business from low ball offers.
The most important issue is to clean up your financials several years before beginning the process of selling your business. Begin managing the way public companies do – showing maximum profits. Your goal is for your financials to accurately reflect the earnings capability of the business. If they do, you are likely to get better offers when the time comes to sell your business.
If you don’t have the lead time to clean up your financials before selling, an experienced professional adviser can still help create new statements that show the true picture of what your business is worth. If you are willing to invest in expert assistance to “bulletproof” your business financial statements, it will pay off well when you sit down to negotiate the sale of your company.
