Most CEOs, partners, and business owners work tirelessly to build their organization. Much of the energy is dedicated to creating differentiated products and services, gaining market share, and managing critical assets, most notably people! When successful, sales growth is measured in double and sometimes triple digits. And with the right marketing, we get the attention of potential acquirers.
But how many of us are prepared for these inquiries? To answer this question, I recently attended a panel discussion on "How to Prepare for a Successful Exit" hosted by CitrinCooperman.
Attendees were encouraged to begin preparing for an exit early, to engage subject matter experts once the process gets started, and to have reasonable expectations. All very sound advice and not surprising. But, one comment caught my attention. Nothing can derail a deal like poor accounting records and associated processes.
Think about it. You are busting out your quarterly goals—hitting revenue and margin targets. Life is good. The first inquiry comes in and you are asked to provide information about your performance the past five years. No problem. You work with your CFO and prepare the documentation. The potential buyer likes what they see. They want to come in and confirm your figures.
Now what? What do you turn over? Spreadsheets? Will the numbers stand up to their accountants' due diligence? Will they be able to see how you calculated revenue? Will it be clear that you are truly matching expenses with revenue? Is everything being accounted for properly?
Are you ready for when that call comes?
- Make sure your financial records can be presented in a way that gives confidence and makes it easy (i.e. have a strong accounting system in place like Intacct implemented by a trusted partner like Leap the Pond.) You never know when the inquiry will come.
- Demonstrate the same level of sophistication with your financial management that you demonstrate with your operations. You will be much happier in the outcome.
- Have your results both reviewed and possibly audited by a CPA firm early (i.e. now.) You will avoid surprises during due diligences.