David Anderson is principal of David Anderson & Associates, a Philadelphia forensic accounting firm that provides a full range of fraud investigation, fraud deterrence programs, and forensic accounting services in Philadelphia and the Delaware Valley.
Selling a house is an important decision, one that’s not made capriciously but undertaken only after solid research and planning, and consultation with industry experts.
Selling a business is a very similar process. You’ve invested time, money, and sweat equity into your company and you want top dollar when you put it on the market. As you do your research and make your plans, strongly consider working with a forensic accountant experienced in business valuation to maximize the benefits of the transaction.
“Whether selling a house or a business,” said David Anderson, principal of David Anderson & Associates, a Philadelphia forensic accounting firm providing business valuation services in Philadelphia and the Delaware Valley, “you must hire a good broker, have your records and physical structure in order, and be prepared to address issues or questions from potential buyers.”
Anderson, a forensic accounting expert in Philadelphia who also is a Certified Valuation Analyst, offers these guidelines to help business owners prepare for a sale:
Find a Good Business Broker
Unless a business owner has extensive industry contacts and experience in selling businesses, Anderson said, sellers should work with a business broker.
“Just as you would do with a real estate broker you hire to sell your home, you’ll want to interview the business broker,” said Anderson, whose company specializes in business valuation services in Philadelphia and the Delaware Valley. “Check references and have the broker analyze your business before you agree to hire them.”
Get Your Books and Records in Order
This is a crucial step in the process, Anderson said, because your business broker and any potential buyers are going to want to examine your books and records as part of their due diligence.
“This is similar to getting your house ready for showings,” he said; “you need to do the same for your books and records.”
Among Anderson’s recommendations:
- Collect financial statements, general ledgers and income tax returns for the past five years;
- Secure copies of all leases, contracts and agreements; and
- Gather organized documentation of any intangible assets or intellectual property.
Business owners also must ensure 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 all liabilities and debt are accurately reflected on the books, and
- Identifying non-business and/or one-time expenses that have been recorded.
Failure to get books and records in order can result in potential buyers reducing their offers because they question the “quality of earnings” of your business.
It’s often a good idea to have an independent expert, such as a forensic accountant, review your books and records to make sure you haven’t missed anything, said Anderson, a Certified Valuation Analyst and forensic accounting expert in Philadelphia.
Address Key Potential Legal Issues
Review your business with your attorney. Make sure your attorney (or the attorney’s firm) can address each of the following: Do you having pending litigation? If so, be prepared to address this with potential buyers.
Are key employees under contract? If not, they could leave and take business with them or divulge business secrets. Have you adequately provided for warranty and return issues? If not, potential buyers may insist upon you setting up reserves which can lower the sale price.
Are your pension, profit-sharing, and other retirement plans fully funded? If not, this also can lower the sales price. Are your trade secrets and intellectual property adequately protected with patents or trademarks or other legal mechanisms? If not, move forward with implementing these protections.
Get Your Business Premises in Order
Beyond the books and records, Anderson said business owners should take a critical look at their actual business premises. Among his recommendations:
- Straighten up and organize;
- Dispose of obsolete inventory, old furniture, and retired equipment;
- Make repairs and perform maintenance so the facilities are in working order and look fresh; and be sure you have keys to all locks, and
- Investigate potential environmental issues, and address them before buyers come calling.
“These are the same things you would do when you are selling a house,” said Anderson, a business valuation expert in Philadelphia who specializes in providing a full range of forensic accounting services in Philadelphia and the Delaware Valley. “Making sure your physical premises are in top shape will help you get the best possible price for your business.”
Prepare for Questions
Anticipate what buyers will ask and have the answers ready, Anderson said. “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 employees and key employee retention, customers and customer retention, vendors, products and services, industry trends, and your vision for the future of the business.”
If you require the services of a Certified Valuation Analyst or any other forensic accounting services 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 david@davidandersonassociates.com.
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, litigation support, economic damage analysis, business consulting and outsourced CFO services. Company principal David Anderson has more than 30 years of experience in financial and operational leadership positions and is a Certified Public Accountant, a Certified Fraud Examiner and a Certified Valuation Analyst.
