What's Your First Call When Selling Your Business

What's Your First Call When Selling Your Business

Posted on November 06, 2017
When Selling a Business, Your First Call Should be to….Your Accountant?
 
I know it seems strange for a business broker to recommend a potential seller talk to their accountant first, but that’s what I suggest.  Your accountant can set a foundation for a successful transaction.  For most business owners, their accountant has been their closest and most trusted financial advisor.  In a lot of cases, they have known that accountant for many years.  In turn, your accountant knows your goals better than most.  A successful transaction will require a team of advisors consisting of an accountant, business broker, and attorney.  Below are a few reasons why you should call your accountant first.

Financial Reports: I don’t think it’s possible to overstate the importance of clear and accurate financial statements when selling a business.  Many small businesses tend to produce in-house financial statements and then let their accountant file the tax returns.  When you get ready to sell your business, you need to allow your accountant to prepare the financial statements.  You should also meet with your accountant to understand those financials better.  Professionally prepared statements will add much more value to the company than it costs to prepare them.

Valuation: Even if your accountant does not specialize in the valuation process, they can work with your business broker or valuation specialist to develop the fair market value of your company.  Sometimes, real value is buried in your financial statements and an accountant can help discover hidden items that increase your selling price.
 
Tax Implications:  The vast majority of transactions involving small to medium-sized companies are asset sales.  Allocating the purchase price correctly can make a huge difference in the tax you will pay upon the sale of your company.  Your attorney or business broker can tell you how to structure the transaction to minimize taxes, but only your accountant knows your complete financial picture and is in the best position to estimate your tax bill.

Post-Sale Planning: So, you’ve just sold your business and now you have all this money.  What now?  Whether it’s retirement or a new venture that requires investment, it’s wise to strategize with the help of an accounting partner. Selling your business is probably the largest financial decision you will make in your life.  Having the best team on your side can make the difference between success and failure with the transaction.  Building your team should start with a call to your accountant.
 
About the author:

Troy Frank is the president of Indiana Equity Brokers (IEB) located in Indianapolis.  IEB is a leading business brokerage firm specializing in the sale of small and medium-sized companies.