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Jul 07, 2023

Selling Your Business: Optimize Financial Performance and Accounting Practices Before Going to Market

Best Ways to Selling Your Business Before Going to Market

Question: What’s the most common area of a business needing improvement before being marketed for sale?

Answer: Financial performance and accounting practices.

Prospective buyers will closely scrutinize the financial health of a business, including profitability, cash flow, revenue trends, and growth potential. Ensuring financial records are accurate, up-to-date, and well-organized can significantly impact the perceived value of the business.

Selling Your Business with 6 Practices Before Going to Market

Here are some key aspects to focus on that will go a long way to netting you substantially more money when you’re ready to sell:

  1. Clean Financial and Accounting Records. Organize and maintain clear accounting records and financial statements, including profit and loss statements, balance sheets, and cash flow statements. Ensure that all transactions are accurately recorded, and there are no discrepancies.
  2. Minimize High-Cost Debt. Pay off or reduce outstanding debts, particularly those with high-interest rates. Excessive costly debt can deter potential buyers and negatively impact the company’s valuation.
  3. Improve Profitability. Identify areas where you can cut costs, increase revenue, or improve operational efficiency to boost the bottom line. This could involve renegotiating supplier contracts, streamlining processes, or investing in cost-saving technologies.
  4. Optimize Working Capital. Efficiently manage inventory, accounts receivable, and accounts payable to ensure adequate cash flow and demonstrate effective financial management.
  5. Financial Projections. Develop realistic financial projections that showcase the growth potential of your business. This can help prospective buyers understand the return on investment and future potential earnings.
  6. Tax Compliance. Ensure all tax filings and payments are up-to-date and in compliance with relevant laws and regulations.

So, have you done all you can with your financial and accounting practices to make a lasting impression on potential acquirers of your business?

At Linden Law Partners, in addition to being M&A legal specialists, we also understand the full spectrum of components required for an optimal M&A exit event. To this end, we support our clients from the outset and before going to market to greatly increase their odds of maximizing the outcome of their business sale. This includes not only advising on the process and initial advance preparations, but also helping them obtain access when needed to qualified accountants, investment bankers and other M&A specialists to ensure they (A) position their business as advantageously as possible before going to market for sale, and (B) assemble a first-rate deal team to navigate them through the process.

Contact us to discuss how we can help.

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