When the decision is made to put a business on the market, many small and medium enterprise owners often make the decision to sell fairly quickly. There are numerous reasons for this which includes the death of the main business operator, a divorce or the inability to get further funding.
Even after years of dedication and hard work, when a business is to be sold quickly, the current owners are the ones who miss out by accepting a low price for the business. In a lot of cases, the owners believed the business was a working investment, which would provide for them in their retirement after selling the business.
So what are the reasons that a business is sold for a reduced amount? Simply put, many of these SMEs have poor business and accounting systems, lack of internal controls, poor management reporting, lack of budgets and ultimately a lack of business planning meaning there are no adequate records available for the potential buyer.
All the issues mentioned above could be avoided with a business plan. As the old proverb says, ‘if you fail to plan then you plan to fail.’ A business plan is a necessity for every business.
A good plan should incorporate the following:
• The goals and objectives of the owners, both short term and long term;
• Profit forecasts and cash flow forecasts
• Capital needs and source of that capital
• Operational and marketing plans
• A valuation of the business
• A plan for good accounting, business and reporting systems
The best way to start is to have an audit of the business undertaken.
What are the advantages of doing an audit?
• If you put the business up for sale, prospective buyers will be able to view the audited accounts, giving them much more confidence in the figures and a much higher sale price
• You can provide your bank or other financers with the audited accounts, giving them confidence with the figures and the opportunity for more finance if applicable.
An audit is the examination of the financial report of an organisation, allowing for a report that hopefully reports that the assets and liabilities are properly stated in the accounts and that the profit and loss account is a true record of the operations of the business. One of the great benefits of auditing your business is that the auditor will thoroughly examine all of your accounting and business systems and assess the effectiveness of the internal control processes. From here, the auditor can provide you with a detailed report identifying weaknesses in your systems and recommendations to improve.
The Quinn Group’s team of auditors can conduct an audit of your business and help you identify areas to improve on. Submit an online enquiry or call 9223 9166 to arrange an appointment with our auditors today.