Having quality bookkeeping reduces risk and inspires confidence in potential buyers. Keeping good records which are accurate and detailed will help to establish your cash flow and your credibility. Here are 5 ways you can make your records appealing:
1. Cash Flow is a large value driver for most businesses. Think of methods to improve your cash flow so that your Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) is maximized and shown to be sustainable.
2. Try to have a diverse customer base so that a relationship with one customer is not as critical to sales. Long term contracts and annual servicing/licence fees provide more predictable and low risk income streams which are attractive to potential buyers.
3. Don’t put off purchasing or hiring equipment beyond a reasonable timeframe. Once a potential buyer doubts your credibility, due diligence requirements will increase and your potential business value will be adjusted to take into account any perceived risk. Having documented procedures and employment contracts in place for existing staff may encourage a potential buyer to see that the business will be functional and have a future without you as the key decision maker.
4. Keep a record of articles and stories in the media that relate to your business that may show that your business is a leader in its industry. Have a strategic growth plan which demonstrates the potential for growth and profitability as buyers have a keen interest in the future.
5. Identify any negatives your business has and offer solutions for turning these into positives. Taking the bad news out of the equation early is proactive and avoids unrecognized issues haunting the negotiating table later on.
by Carol Allan
Carol is a Senior Accountant at Insight Accounting advice. She is a registered tax agent, has a Bachelor of Commerce and Advanced Diploma in Accounting. Carol’s areas of expertise include tax and property advice.
The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information.