Selling a business is not dissimilar from selling a house. There are a number of steps a business owner must take to prepare the business for sale and it starts with relying on a business valuation expert to determine what your business is worth.
“The parallels in selling a house and selling a business are strong,” said David Anderson, principal of David Anderson & Associates, a Philadelphia forensic accounting firm that provides business valuation services in Philadelphia and the Delaware Valley. “In either case, you must understand the value of what you are selling. You also should hire a good broker and have your records and your physical structure in order. And you need to anticipate and be ready to address issues or questions from potential buyers.”
Anderson, a forensic accounting expert in Philadelphia who also is a Certified Valuation Analyst, outlined the following recommended steps to prepare a business for sale:
Determine the Worth of Your Business
To make sure your expectations are realistic, you need to have a reasonable idea of what your business is worth, Anderson said.
“Unfortunately, websites like Zillow that cater to home sales don’t exist for the sale of businesses and there simply aren’t other readily available sources to provide you with that information,” explained Anderson, a business valuation expert in Philadelphia whose company offers a full range of forensic accounting services in Philadelphia and the Delaware Valley. “Your best bet is to use a professional business valuator.”
Anderson said most businesses don’t need a full business valuation, but can instead request a less expensive calculation of value to get an idea of what their business generally is worth. However, Anderson, a Certified Valuation Analyst and forensic accounting expert in Philadelphia, cautions that while a calculation of value is less expensive, it also is less reliable than a full business valuation, and generally cannot be used in litigation. It is a perfectly reasonable tool to use to determine the worth of a business, as long as the business owner understands its limitations, he said.
Find a Good Business Broker
Unless a business owner has extensive industry contacts and experience in selling businesses, Anderson recommends that sellers utilize the services of a business broker.
“Just as with a real estate broker you hire to sell your home, you’ll want to interview the business broker, check references and have the broker analyze your business before your agree to hire them,” said Anderson, whose company specializes in business valuation services in Philadelphia and the Delaware Valley.
Get Your Books and Records in Order
This is a crucial step in the process, Anderson said, explaining that both the business broker and potential buyers are going to want to examine your books and records as part of their due diligence.
“Just as you would get your house in order for showings, you need to do the same for your books and records,” he said.
Among Anderson’s recommendations: Collect financial statements, general ledgers and income tax returns for the past five years if possible; secure copies of all leases, contracts and agreements; and gather organized documentation of any intangible assets or intellectual property. Business owners also must assure that their books accurately reflect the financial position of the company, he said. This includes writing off old accounts receivable, adjusting inventory for obsolete and slow-moving items, removing retired fixed assets from the books, making sure that all liabilities and debt are accurately reflected on the books, and identifying non-business and/or one-time expenses that have been recorded.
It’s often a good idea to have an independent expert, such as a forensic accountant, take a look at your books and records to make sure you haven’t missed anything, said Anderson, a Certified Valuation Analyst and forensic accounting expert in Philadelphia.
Get Your Business Premises in Order
Beyond the books and records, Anderson recommends that business owners take a critical look at their actual business premises. Among his recommendations: Straighten up and better organize the premises; dispose of obsolete inventory, old furniture and retired equipment; make repairs and perform maintenance so that the facilities look fresh and are in working order; and make sure you have keys to all locks.
“These are the same things you would do when you are selling a house,” said Anderson, a business valuation expert in Philadelphia who specializes if providing a full range of forensic accounting services in Philadelphia and the Delaware Valley. “Making sure your physical premises look the best they can will help you get the best possible price for your business.”
Prepare for Questions
Anticipate the questions buyers will ask and have the answers ready, Anderson recommends. “This will speed up the due diligence process and impress buyers by showing them you truly know your business,” said Anderson, an expert in business valuation services in Philadelphia. “Be prepared to discuss key employees, key customers, key vendors, key products and services, key industry trends and your vision for the future of the business.”
If you are in need of a business valuation expert in Philadelphia, or if you require any other services of a forensic accounting expert in Philadelphia and the Delaware Valley, please contact the Philadelphia forensic accounting firm of David Anderson & Associates by calling David Anderson at 267-207-3597 or emailing him at firstname.lastname@example.org.
About David Anderson & Associates
David Anderson & Associates is a Philadelphia forensic accounting firm that provides a full range of forensic accounting services in Philadelphia and the Delaware Valley. The experienced professionals at David Anderson & Associates provide forensic accounting, business valuation, fraud investigation, fraud deterrence, litigation support, economic damage analysis, business consulting and outsourced CFO services. Company principal David Anderson is a forensic accounting expert in Philadelphia with more than 30 years of experience in financial and operational leadership positions. He is a Certified Public Accountant, a Certified Fraud Examiner and a Certified Valuation Analyst. Anderson also has served as a divorce accountant and marital dissolution accountant in Philadelphia and the Delaware Valley.