There’s a saying we’ve heard in this business: “In God we trust, all others bring data.” Makes a lot of sense, doesn’t it? Even if the potential buyer likes you and likes what he hears you tell about your company, he or she can only base their decision on hard data of past performance.
- Can you identify your Top 10 clients and their profitability? How much does it cost you to acquire a new client?
- Has your CPA grown with your company and are they providing you with the tools you need to manage your company?
- Have you filed your tax returns in a timely manner and do not have any outstanding tax liabilities to worry about?
- How much of your personal lifestyle expenses do you absorb as valid business expenses today? One of the goals in “recasting” your financials for a prospective buyer is to take out your salary and benefits, auto, travel, phone, meals and entertainment, and other recurring expenses that will not be there when you are gone. There are two issues here: 1) to help the company look attractive to the buyer by removing expenses that won’t be there when he buys it; and 2) to help you prepare for managing those expenses when you are no longer affiliated with the firm.
- How are you managing your debt service? Your accounts receivable? Days’ inventory?
- Can you provide a trailing 12 months of data for the buyer who has approached you mid-year?
- Are you using generally accepted accounting principles?