Is Your Businesses Sellable?
Is Your Businesses Sellable?
There are two main reasons why your business may not be immediately sellable from a financial point of view. The first has to do with accounting records that are in disarray. The second involves the use of overly aggressive tax avoidance measures.
If your bookkeeping records, financial statements, and tax returns aren’t organized and up-to-date, prospective buyers will have trouble understanding your business and the finances behind it – and they will shy away. There’s also little point having your business appraised if your books don’t accurately reflect your financial performance, because a true valuation won’t be possible.
At the same time, running personal expenses through your business to reduce your profit on paper may have lowered your annual tax liability, but it also makes your business less sellable.
The less profit you demonstrate:
- The less money a potential buyer sees for covering their living expenses,
- The less debt load capacity a bank sees in terms of qualifying that prospective buyer for a loan, and
- The lower your overall business valuation is likely tobe
If you’re a business owner looking to sell, there’s no quick fix when it comes to mitigating sellability problems like these.
But by working with a financial professional to get your accounting records in order and by keeping tax avoidance tactics to a minimum for 12-24+ months, your business valuation will reflect a cleaner, more profitable enterprise from both a bank’s and a buyer’s perspective.
