Making the decision to sell your company, or at least exploring the possibility, is something you need help with if you want to have the most lucrative exit possible. 

Make sure your CPA is someone that knows your intentions and get them involved as soon as possible. Your future financial security depends on it. 

Ed LloydEd Lloyd,  CPA whose firm prepares exit planning strategies for clients throughout the United States, shares his process for working with clients facing a potential sale decision. 

“I usually start with having a good heart-to-heart conversation with clients just to make sure they have thought through what trading their business for cash means for their future. There are many planning opportunities available they’ll want to capitalize on. This is typically one of the biggest financial transactions in their life and it is critical to plan for it.”

He takes his clients through a SWOT analysis exercise where they talk about strengths, weaknesses, opportunities, and threats. “It’s a useful exercise because as their CPA, I need to know where they are in life and finances,” he says. “I might use this information to advise on how the deal should be structured. Lack of planning can be very expensive; the time and investment spent in this area are typically a big return on investment for the client.  In addition, our strategies might be different if the sale is part of a family succession plan, or sale to employees. I want to help them understand where the gap is in their business so we can work to fill it. It might be in management, operations, client satisfaction, sales or expenses.” 

“Optimally, you should be preparing for a company sale up to 3 years in advance to get the systems in the business optimized, although that rarely happens,” admits Lloyd. “Buyers want to see a track record of performance over three years. It’s in the seller’s best interest to maximize seller discretionary earnings (SDE) during that time. It is also important to document what expenses are seller discretionary expenses so you can detail this to the potential buyer. Increasing the SDE typically increases your sales price.” 

Lloyd says it’s always good practice to run your business like you’re going to sell it. He uses a home as an analogy. After you fix your home up you feel great about it, the same holds true for your business. Make the business so that you enjoy it more while you have it and it will be worth more to the buyer when you are ready to sell it.  

Patrick LangeHVAC industry business broker Patrick Lange concurs, “The best businesses I list are those that plan for big expenses and budget for them. A great CPA will put equipment (like trucks) on a depreciation schedule until they need to be replaced or are at the end of their useful life. Buyers never want to see rustbucket trucks that could break down on the way to a call. First impressions and curb appeal matter when selling a business too. 

In the business sale process, once a qualified buyer is identified, you may need your CPA’s help in the due diligence phase. In addition to the standard documents like business tax returns, your CPA can put together other information that helps buyers achieve a level of confidence they need to move forward.

If you haven’t filled your CPA in on your sale plans, it’s not too late. Lloyd says from a tax planning perspective, he only needs about three months to do it properly. However, if you want to maximize the money you collect at the closing table, you’ll have to start a lot earlier.

Remember, your CPA is on your side and part of your team. Selling your business doesn’t have to be filled with stress. Preparation brings peace. Enable your CPA to help you.