a qualified and licensed CPA prepare your tax returns—rather than an unlicensed bookkeeper. Avoid having business returns prepared by the store front tax preparation firms. Many of their employees are only part time tax preparers—and not experienced business tax consultants or preparers. Your prepared returns must show credibility. No credibility on tax returns often equals no sale of the business (or at least no sale for a good price).
•Have a certified public accountant prepare (at minimum) a compiled financial statement for your business no less than once per year. A buyer for your business (and the buyer’s banker) will have much more confidence in the numbers and the business, knowing that you cared enough about the business to do things right. This can add value to the business.
•Ask your CPA to prepare a special supplementary statement to your annual financial statement: Statement of EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization). The EBITDA is often what bankers and other financial analysts look at when determining the health and value of your company. It is far better for your accountant to prepare these annually—so they can be reviewed by bankers and other advisors, than to force the bankers or other advisors to attempt preparing a statement of EBITDA for your business. And, many times buyers will actually make offers on businesses at some multiple of EBITDA. It is much better to give the EBITDA number to them—than have them try and come up with it on their own.
•Prepare and maintain internal organizational charts—showing the levels of management from the top down. This will easily assist a qualified buyer to understand your organization (it takes away some of the unknowns—thus reducing perceived risks associated with the business). The greater the perceived risks associated with your business—the lower the price.
•Does your company have operating manuals for business operations? If not, consider preparing them and keeping them updated. I have seen businesses actually sell for a premium because the owners had complete operating instructions for the business. Sound too far out? It’s not. Why do you think franchises are so popular (and bought by willing buyers)? The documented operating systems remove certain risks associated with the operations of the business. You can do the same thing for your business—and increase the value of the business.
•Learn about and measure the six key elements of your business (every business has these components):
1.Liquidity of the Business
2.Profits and Profit Margins
3.Sales Trends
4.Borrowing
5.Assets
6.Employees
•When was the last time you had a Financial Performance Review of your company? The six key financial and operating elements of your business should be measured every year and compared to other similar sized companies (a peer group) within your industry. If your CPA firm does not do this type of management consulting, find someone who can perform this important task for you. If your company does not compare favorably to your own peer group—this is a strong indication that the current value of your company is not up to par. By knowing exactly in which aspects your company is sub-par, you can make changes that will improve profits, performance and the value of your company. Your financial management consultant can give you tips and other helpful suggestions for improving your company…and its value.
•Don’t think that you have all the time in the world to begin preparing your business for sale. We are all granted only a specific period of time to be here on this earth. When is the best time to begin preparing your business for sale? The very day you open the doors. If you are like most business owners—that hasn’t happened. But it is never too late to start. From many years of experience as a CPA and a Business Broker, I can tell you that once you begin looking for ways to increase the value of your company—you will also discover how to immediately improve your profits. And, increased profits will add to the value of your company.

I hope these points of consideration help you to organize and clarify your thinking. One of your most valuable assets may be your business. Why not spend a little more time and effort to add value to an asset you already have?

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