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Navigating The Financial Waters

Feb 15, 2020

In Part 1 of this blog segment, we’ll look at the Financial Records.

At Iconic Advisers, we work closely with business owners on a daily basis to manage the entire selling process.

To give you greater insights as to the process, we share here our experience about things you SHOULD DO and SHOULD NOT DO when undertaking the sale of your  business.

 

Part 1 – Financial Records

 

FINANCIAL DO’S

  1. DO Make sure your accountant is familiar with merger & acquisition transactions
  2. DO Request a 3-5 year accounting/tax record package from your accountant
  3. DO Gather all other key business records needed in preparation for disclosing to a potential buyer in due diligence
  4. DO Establish a Purchase Price Allocation Schedule between tangible and intangible assets as part of a Letter of Intent
  5. DO Keep in mind the impact of fully depreciated assets in terms of taxable ordinary income vs. capital gain income

 

FINANCIAL DON’TS

  1. DON’T Assume your accountant is well versed in merger & acquisition transactions
  2. DON’T Leave the detailed analysis of your records for a buyer to “figure out”
  3. DON’T Waste a potential buyer’s time and money by sporadically gathering up records and disclosing bit by bit
  4. DON’T Allow a potential buyer to set an allocation that is unreasonable or unbalanced
  5. DON’T Assume that the buyer will pay all sales tax associated with the deal or ensure capital gains for Seller is achieved

Knowledge Matters

When looking to sell your business, keep in mind it’s not simply a matter of speaking with a prospective buyer that results in an offer and then signing a standard Purchase & Sale Agreement. There can and will be many pitfalls along the way. Working in combination with a professional team of seller’s advocates (Accountant, Broker, Attorney) will help ensure that the selling process leads to the best possible outcome for you.

Keep in Mind

• Buyers are always in the market for profitable businesses
• Your accountant, attorney, and broker must all work together to achieve your specific goals
• There are good and bad ways to approach a prospective buyer
• There are many DO’s and DON’Ts related to selling a business
• Look for an experienced M&A adviser who knows the industry and can speak to all business topics: accounting, business software, legal, tax, operations, personnel, and retirement-related issues

What You Can Do

If you are thinking about selling your business but aren’t sure what your business is worth or how to go about initiating a sale, we are here to help you. Contact us for a free one-hour exit planning consultation. It is confidential and without any obligation. You only have to share a few things about your business, and we will make an overall assessment and answer any questions. This free consultation should help you in making sure that such a life-changing decision to sell is right for you.

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