In a recent CPA Insider newsletter, Patricia Annino, JD, wrote a nice article entitled Key questions to ask the family business owner who plans to sell. Ms. Annino is a nationally recognized attorney with Prince Lobel Tye LLP and an authority in estate planning and taxation. She did an excellent job coaching CPAs to address timing, structure, personal impact of a sale, continuing employment, required earnings after the sale, what benefits will need to replace, finding purchasers, valuing the business and getting the business’ legal affairs in order.
One area that Ms. Annino did not consider was making the business the most attractive purchase alternative. We are fast approaching a buyer’s market as more and more business owners approach retirement age. Too many owners have not thought through the implications of leaving their business. The critical question – why should a seller want your business?
Buyers would prefer not to have to build a sales staff because the owner/rainmaker is retiring. Antiquated IT systems are red flags for buyers. Similarly, poorly maintained production equipment signals a need for a cash infusion by a purchaser. As Ms. Annino stated, legal documents that are not accurate or current are headaches that buyers would prefer not to tackle. If the staff are nearing retirement, the buyer will have to hire new people and will worry about customer and supplier relationships. Uncertainty to a buyer translates to a lower offering price.
What attracts buyers are strong sustainable top line and earnings growth, a market reputation for quality and on time delivery. Buyers would prefer a staff that is motivated to stay with the business and continue to help it thrive.
While some buyers are looking for turn-around opportunities and have an experienced team that can be rolled in to right a ship, they will need to be compensated for the risk through a lower sales price.
B2B CFO® partners have the transaction experience to help owners stay focused on their business while navigating the hurtles a sale poses.
 AICPA CPA Insider newsletter of 4/25/16, Key Questions to ask the family business owner who plans to sell.