I recently met with a client that showed me the postcard he received from a business broker. He had already contacted and met with them about selling his business.
The amusing thing about this is that I was given some data to start their tax return (yes, they are running a bit late, but there is an extension filed). I started asking questions and then he claimed that I was asking the same ones the broker had…
This client may be the mindset to sell the business, but he had not set the business up to be for sale just yet.
The QuickBooks files needs to be cleaned up. Some sales are posting to CGS, understating both sales and CGS. The balance sheet is also a wreck.
The ratios are off, because their rent is outlandish and most of the office space is underutilized. I am suggesting that he move, preferably into a building that he purchases, so he can have an income stream in retirement. He is liking this idea, especially since he had recently calculated how much money has been paid in rent over the last decade or so. I also made a few more recommendations to assist with the ratios.
So, after our meeting he has homework and a timeline to sell the business within the next five years.
- QuickBooks needs to be cleaned up to be a accurate representation of the businesses financial wellbeing.
- He needs to clean up the financial ratios to make the pace more attractive, greater revenue almost always helps.
- A more efficient workspace office and factory is necessary to assist with the ratios
- Increase revenue to solid profitability
- A marketing plan needs to be put in place
- Three to five years of solid profitability
Once those items are accomplished, he should be able to easily sell and get top dollar.