At the FBB Group, Ltd., we finished the year with a multi-company closing on December 31 and started 2015 the right way by closing a transaction in Denver on January 5. The next several months are historically our strongest time for buyer activity and, with the strengthening economy, we expect that trend to continue.
Speaking about the economy, last week, I attended the ACG lunch in Denver. The featured speaker was Alan Beaulieu, who had previously presented at this venue with significant accuracy. Alan was particularly bullish about the U.S. economy due to low energy prices, falling unemployment rates, and low interest rates. The strengthening economy and low interest rates should be beneficial to you if you are planning to sell or buy a business in 2015 or 2016. Below are a few items that you should consider doing at the beginning of the year to optimize the transaction, if you are considering the sale of your business. For purposes of this discussion, I am assuming a December 31 business year end.
Inventory – Take an accurate yearend inventory. If you have obsolete or damaged inventory, get rid of it by discounting it, donating it, or throwing it away. Don’t be tempted to undervalue your inventory to lower your profitability, as it may cause insurance problems and will probably come back to haunt you in due diligence when the buyer’s accountant is verifying your financial records.
Tax Returns – Get your yearend records to your tax accountant promptly and ask him or her to prioritize the preparation of your Federal and State returns. Although you may have previously filed for extensions, when you are selling your company, most lenders will require a current tax return prior to issuing a loan commitment. Additionally, having timely and accurate records are indications of a well-run business.
Housekeeping – This could be a good time to clean up and spruce up your premises. Removing old boxes and equipment, painting, and replacing worn flooring are just a few examples of some things that can make your business more appealing and increase its value. We recently recommended to a prospective client that they obtain an appraisal on the building that was to be sold with the business. During the appraisal process, the appraiser, a seasoned commercial appraiser, made several suggestions for improving the value of the property. After the client made the recommended changes, at a relatively modest cost, the appraiser increased his opinion of value by $40,000.
Record Keeping – Similarly, this could be a good time to organize your records to be sure that contracts are up to date and insurance policies are current and at appropriate values.
As a Seller, it is important to remember that buyers have choices and, to the extent possible, you should strive to make your business appear more attractive than the competition.
The majority of our business is derived from referrals. Please consider referring our services if you encounter a situation involving the potential purchase or sale of a business.
Ronald V. Chernak – President
(originally published in January 2015 eNewsletter)