As your client’s accountant, presumably with an ongoing relationship that has spanned a number of years, you likely have an understanding of your client, and his or her motivations, goals, and business. You are, therefore, in the ideal position to advise and guide your client through the process of selling a business.
Your client will require a number of experts, whom you can help find and help coordinate. Experts would include a lawyer to prepare and review contracts and address legal issues, a business appraiser to provide a fair valuation of the business, an investigative service to perform a due diligence review of the buyer, and a business broker to find a buyer. Other experts may also be necessary, but you, as the CPA, should be the center of the wheel, since you will be advising the seller and developing and providing financial reports and tax guidance.
Before the Sale
If your client discusses with you the desire to sell their business, take some time to prepare in order to guarantee the best possible price. Your client should evaluate processes, conditions of the facilities, and current income. He or she should make changes as needed. Here are some steps you can take:
- Discuss with your client the sale options available to determine which is best for the company and your client. Internal sale options include selling to management, employees, or family members through a leveraged buyout, employee stock ownership plan, or a stock redemption plan. External options could include a sale to a third party or a private equity recapitalization. Discuss tax implications of the different sale options.
- Recommend that your client evaluate processes and procedures to streamline operations, saving money and improving efficiency. This will have the dual effect of improving profitability and demonstrating the business is a “well-oiled machine” that will transition easily to a new owner.
- Evaluate the client list to see if it needs diversification – for example, if 20% of sales are from a single client, this could decrease the value of the business because the income could appear less stable.
- For brick-and-mortar businesses, advise your client to make improvements to the facilities, update old furniture or office equipment, make repairs, add a coat of paint, and spruce up the landscaping.
- Legally transfer ownership of items that the owner wants to keep for personal use, for instance, the company truck.
- Help the owner articulate the unique value or strategic benefits of the company.
- Organize financials for the past 3-5 years and make sure your client is using an up-to-date accounting product, preferably one that you are integrated with. Clear, transparent, and well-organized financial records will speed up the selling process and create a sense of confidence in the buyer. This will also give the buyers reassurance that they already have lined up an accountant who knows and understands the business and will be on the job on day one.
Help the client build an exit strategy to ensure that outstanding invoices are paid and financial records are being maintained up to the moment of transfer of ownership.
During the Sale
During the sale, you could act as a coordinator to keep the team of experts communicating and moving quickly through the process. If one expert drops the ball or gets pulled away by another client, it could slow down the entire procedure for your client. So this is an invaluable service to offer.
You can also communicate with the buyer’s accountants to provide answers to questions and provide timely reports as needed. All of these steps will help speed along the sales process and create an atmosphere conducive to business trust.
After the Sale
Once the sale has been finalized, you can be an asset to both your client and the new owners of the business. Since you know the business well, you will be able to provide guidance and ongoing financial support for the new business. In addition, you can help your existing client, who likely now has a significant financial gain from the sale of the business and probably some free time, to determine their next step. A new business? Investment in real estate or stocks? Whatever it is, you have proven yourself to be a trusted financial advisor and your client can turn to you to help chart a course for the future.