So, you’ve done the hard part — you’ve started a successful accounting firm and scaled it to the point that you’re ready to sell. Now what?
Selling any business can be a complex endeavor, requiring careful preparation, strategic thinking, and a deep understanding of the market. It can be easy to get wrong and leave money on the table without the proper preparation. In a recent episode of the “Building the Premier Accounting Firm” podcast hosted by Universal Accounting Center President Roger Knecht, business exit expert Jessica Fialkovich shared invaluable insights on how to effectively navigate the process of selling an accounting business.
In this blog post, we’ll delve into the five most common mistakes Jessica has seen entrepreneurs make when selling their business. It’s unfortunate to see how often small business owners aren’t able to sell the business for the value they deserve, Jessica said. Avoid these mistakes to maximize the valuation of your business when you choose to sell.
Mistake #1: Not running the business like you’re going to sell it
You may find it surprising to hear, but around 95% of the clients Jessica works with don’t plan ahead when they sell their business. They simply wake up one morning and decide that they’re ready to sell. Burnout can be a big motivator to do so.
Obviously life circumstances can dictate a lot when it comes to the timing of selling a business, but that’s why business owners need to be intentional about operating the business with the mindset that it will be sold one day. Running the business like you’re going to sell it will not only make your business more successful, but it’ll allow you to easily get things in order to sell the business when you do decide it’s time to move on, Jessica said.
Mistake #2: Not having the right team around you
Business owners looking to sell need an experienced and driven team of professionals around them to ensure they get the proper value for their business, Jessica said. She recommended having a business broker, an accountant, a financial planner, and a lawyer.
Specifically, you should look for professionals who have experience working with businesses of the same size as yours. It might not be the best choice to hire the lawyer who works mostly with Fortune 500 companies for your $500,000 bakery, for example.
Mistake #3: Financial Cleanliness
This is the number one reason why businesses don’t sell, Jessica said on the podcast. You need to have all of your quarterly profit-and-loss statements, tax returns, balance sheets and other financial documents in order. Investors commonly look at tax returns in their valuation of the business, so it’s probably wisest to push for the highest profits you can and be ok with paying high taxes for a few years so you can prove the value of the business to investors.
Jessica said it’s all too common that a business owner will come to her looking to sell, but they’re more than a year behind on their profit-and-loss statements. That won’t be enticing to business owners.
Mistake #4: The business is reliant on YOU
When you’re starting your business, so much responsibility falls on your shoulders. A lot entrepreneurs take pride in their grind, but being overly involved as the CEO can actually be bad for business valuations. It shows the investor that if you step away, the workflow and culture of the company may completely crumble.
Roger and Jessica offer a number of great ways to test the impact you leaving the business would have on your employees in the full episode of the podcast.
Mistake #5: Not being flexible in your expectations
There are tons of different evaluation methods out there, but until you hit the market, you can’t really know what the business is worth or who’s going to buy it, Jessica said. So many business owners end up not selling at all and eventually close their doors instead of taking lower offers or financing options from buyers.
Business owners need to maintain a flexible mindset when they consider selling the business.
Listen to the full episode
Along with these five mistakes to avoid when selling an accounting business, Jessica and Roger also gave actionable tips for building an accounting business to sell just one year after starting it. There is so much more to explore in this fascinating episode. Listen to it in full here:
Starting a successful accounting business can be an overwhelming venture, but it’s one of the most rewarding career choices you could make. With Universal Accounting Center’s training programs and coaching, you can build a successful bookkeeping, tax, and/or advisory business in 90 days. Our team of industry veterans will help you understand the curriculum and navigate any roadblocks you encounter while working with clients. To take the first step on your path to starting a successful accounting business, call 877-801-8080 or set a time to discuss your future when it’s more convenient for you HERE.