You know your business! But does your buyer?
You’re a business owner and you know your business.
You know your customers, your products and services. You know your suppliers and who to go to for what. You know your staff and who you can rely on when push comes to shove. You know your bank balance and how much you need to invoice each month to cover your costs and make a profit.
Your business is a business system and you know how to make it hum.
You understand what is critical to your business’ success. And now you’re seeking to sell this system and all the IP and potential that it holds….. and at the highest possible value.
But as we all know, your view of what your business is worth and what future economic value it can produce, isn’t always going to marry nicely with what buyers are prepared to pay.
Buyers are going to need to feel assured that what you’re telling them is based on facts and backed up by figures.
So what exactly do your buyers want?
They want to feel like they have paid a fair price.
They want to feel certain about their purchasing decision.
The quality of the financial records of your business is key to convincing your buyer of the value you place on your business.
The quality of your financial records is also key to making your buyer feel confident that they are in fact making a smart and considered decision.
Finally the presentation of your financial records in such a way that WOW’s your prospective buyers is a great way to give them confidence in your overall business system.
Poor or incomplete financial records will invariably reduce the number of buyers interested in your business, which in most cases will place downward pressure on the ultimate value you will receive.
Quality financial records are going to maximise the number of buyers interested in your business while also, simplifying the due diligence process by ensuring you have the information ready and waiting for prospective buyers…. on demand.
So what does a decent set of financial records look like?
- 3 – 5 years of historical records. Ideally.
- A Profit & Loss Statement
- A statement of cash-flow
- A fully reconciled and verifiable balance sheet
- A fixed asset register and depreciation schedule
- Your BAS statements and Company Income Tax Returns
- A list of your top clients and their respective revenue contributions to the business
Now, I’m not suggesting that you’re going to want to front up with a comprehensive set of financials in your Information Memorandum.
But having this information in good order and ready for the due diligence process is going to place you and your business in the best possible light for prospective buyers to see, and to feel confident.
It’s also going to streamline the sales process as you won’t be needing to reactively respond to due diligence queries. You’ll have the information on hand.
The good news is that cleaning up your accounts does not need to be a stressful arduous task. Nor costly. With today’s marketplace of cloud based accounting and data visualisation software, the opportunity seems limitless.