The business sale: top financial factors to building value.

• Author: Renelli, Steve
• Position: BUSINESS SENSE

Does your accountant dread your visit? Bad record keeping is, in fact, the biggest roadblock to selling a business. Buyers want a business with a proven track record of consistent financial performance with solid, growing revenue and earnings.

Let's look at some top financial drivers of business value. Focusing on these will make it easier to sell your business and get you more money--then as well as now. Assess your own business, determine which factors affect your business the most and prioritize what you want to work on.

Keeping (in the) good books

A correct set of books prepared with proper accounting software is a necessity Documents need to be current and correct, demonstrating timely remittances and filings.

Compliance is essential: issues with the Canadian Revenue Agency or others can freeze your accounts and destroy your business. Continuity is also important. Are you dependent on a single employee who could leave?

Outsourced bookkeeping provides efficiencies that can benefit small businesses as you pay for work that's being done, not standby hours. Clean and compliant books will contribute to a good relationship with your accountant and save you dollars there, too.

A good bookkeeper will also help you understand your numbers, providing forecasting, financial analysis and identifying cash flow risks.

Keeping good records and communicating any changes is a necessity Owners often dispose of assets or sign a new lease and forget to advise the person doing their books.

Financial Value Drivers Clean up the balance sheet. A balance sheet provides a snapshot of the business's health. Use it to pinpoint and remove obsolete and slow-moving inventory or excess cash. Resolve potential liabilities and lawsuits, ensure that assets are properly recorded and that expensed R&D investments are noted.

The top reason businesses fail is not poor profit but dry cash flow held hostage in accounts receivable or inventory.

Increase revenue and profits. All else being equal, a better bottom line leads to a higher business valuation: a) sell more to existing customers, b) sell to new customers, or, c) a combination of the above.

How efficient are you at turning sales into profit, i.e. controlling expenses? Keep in mind that it takes six times as much money to attract new customers to businesses than up-selling, on-selling and generally over-servicing existing customers. You'll want to keep your customers...