Behind any successful business, you will find an array of individual experts providing support and guidance along the way. These will usually include an accountant or bookkeeper who will maintain the correct records and ensure that tax affairs are always up-to-date. Yet the business owner may often look to an accountant for more than simply the "essential" tasks, and they often need to refer to this expert for help in making business decisions. For example, what type of advice can an accountant give if the owner is ready to retire and sell up?
Dealing with the Intangible
When you're thinking about passing on your organisation to someone else, you need to remember that a business is, in many situations, intangible. It's not like a home where you can sell an asset that is evident for all to see and where value can be ascertained by referring to similar buildings in that neighbourhood.
This means that you must build a clear picture for potential buyers and show them that your business will be worth the anticipated asking price. You must ensure that the company is in the best shape possible and will need comprehensive accounting records.
Understanding Your Multiples
Business values are often represented by notional "multiples." Your company may be worth a multiple of the net profit figure if it is in good shape and could be expected to perform in the future. Again, this is somewhat intangible and often represented by sentiment. No hard and fast rule determines what this multiple should be other than averages used through your specific industry.
Preparing Your Accounts
So, how can you ensure you get the best value for your business? This is where an experienced business accountant will come into their own. They'll understand some of the benchmarks used in the business sales industry and use certain ratios to determine your position. Importantly, they will also tidy up your books and may begin to produce management accounts month by month that often date back several years.
Inflating the Value
Further, the accountant can pinpoint some items of expenditure that could be classified as "owner benefits." These costs are not essential in this case and could be added back to the net profit figure. By doing this, you would then be able to multiply a larger net profit than you would otherwise and therefore generate a higher sales price.
Crafting Your Approach
Remember, a potential buyer and their broker will need to carefully analyse performance and see whether they are willing to pay your asking price. It's up to you to present your information in such a way as to persuade them, and you will definitely need the help of a good business accountant.
To learn more about business management, reach out to a consultancy firm.