Financial Growth: Can you sell your business without financials?

Preparing to sell your business is not a short-term task, especially if you want the right price. It takes preparation and planning and needs the right documentation to show your business in the best possible light. This includes the financials.

To sell your businesses you will need to show that your business is worth investing in.  Having well organised documentation makes a good impression and can prove the worth of your business.

This information includes:

Normalised financial statements

The financial statements provided to a potential buyer need to reflect the state of your business. But keep in mind these financials may include items that are specific to you, the owner and may not be relevant to a potential buyer.  Types of items that may be adjusted for in normalised financials are personal assets or expenses flowing through the business and abnormal events that have occurred that will not necessarily be repeated.  It will also review payments made to the owners. How are you paid? Wages or dividend or a combination of the two? If you were to be replaced what would the market value of your role be? The financial statements need to be normalised to reflect data for the business only. Is if typical that a potential purchaser will request 2-3 years of data.

Details and a breakdown of customers and revenue

Depending on your industry, your recurring customers can be the bread and butter of the business. Being able to provide details (anonymously) of how your customers influence your business is important.  Having a few clients dominating the turnover can reflect a greater risk to potential purchasers.  Is this an area that your business needs to work on in preparation for sale?

Key personnel details

Potential buyers will want information on the influence of key personnel.  Are the customers loyal to the business or are they attached to you and/or key personnel?  What happens to customer retention when you leave?

Depending on the nature of the business sale what will happen to the staff? Will they be expected to move across with the new owners? Is this is viable situation for your staff? Understand how reliant your business is on these on these staff members and what the effect on customer retention/future turnover will be if they leave.

Similarly, you as the business owner may be required to continue with the business for a certain amount of time for hand over. Is this something you are willing and able to do?

Valuing your business

There are many methods of valuing a business. Valuations give you an insight on what your business might be worth in the market based on other sales in the industry and key aspects of your particular business.  It helps give you a starting point for negotiations and can set your expectations. Obtaining a valuation of your business well before you start the process of selling your business is an important step. Why? Because most business owners tend to assume their business is worth more than it actually is.  Having an independent valuation early on provides a realistic view of your business’s worth. It also gives you the time to work on increasing the value before putting your business on the market if your expectations are not met.  Plan for the value of your business, don’t be caught by surprise.

To sell your business you want to show it in the best possible light.

  • Start planning early
  • Take a fresh look at your business
  • Identify areas that can be improved to increase the value of the business
  • Make sure you have the right documentation to present to a potential buyer to demonstrate why your business is worth buying.

With offices in every capital city and experience spanning over decades; Accru’s has the knowledge and experience to make sure your business sale goes smoothly. If you’re looking at selling your business and want to make sure everything is in order, contact your local office today!

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