We’re just a few weeks into spring and that means it’s time for spring cleaning – both at home and at work. Putting in this effort on a yearly basis makes due diligence and the whole business sale process a lot smoother. Here’s what I mean:
Clean financials: I harp on this a lot. Messy numbers and casual accounting practices create headaches when it comes time to sell. Audited Financials, on the other hand, can actually increase a buyer’s offer.
Hopefully, you have a good relationship with your CPA. If not, due diligence can be painful for all involved. Answers trickle in piecemeal, responses drag out, and parties on both sides get frustrated.
Clean facility: Neatness matters. Buyers will always comment with pleasant surprise when a facility is clean and organized, with a logical place for equipment and inventory.
This goes for office teams too. If you have even one manager who hoards paperwork and lets things pile up, buyers will take notice.
Digital files: We brought on some new team members a while back and quickly realized our digital filing needed some help. After a few hours of clean-up, our file systems are better labeled and more intuitive, and that’s going to make work more efficient for everyone.
One company I know has even planned a digital spring cleaning as a team. They’ll spend an hour or so going over their file systems, agreeing on things that should be deleted, moved, or renamed.
Extra equipment: There’s just something about machine shop guys—they love going to auctions and getting good deals. But a lot of that equipment goes unused. Then we have a problem when it’s time to sell, and I have to tell them that their $10 million in asset value is only worth $8 million on a cash flow basis.
Most business owners would rather maintain employee jobs and sell a going operation than sell off their assets one by one. My suggestion is to look at equipment utilization and right-size accordingly. One option is to take unused equipment to auction. That revenue, together with what we can get for the business, will get us closer to the seller’s goals. There’s no reason to keep excess equipment on the books in a sale.
So as you open up your windows this season, take some time to clean and organize. Declare a jeans day and get the entire team involved. You’ll all be more productive and you’ll be better prepared when it comes time to sell. Buyers will take note and reward these efforts.
Jim Friesen, MBA, CPA, CMA, CM&AA
Partner | M&A Advisor
