Sold! Navigating your client through a business' sale.

• Author: Savett, Lou

The climate for selling a business today is about as good as it gets. Low-interest capital is available through almost every conceivable source, including private equity groups, company buyers and lending institutions. Buyer expectations of returns are as low as anyone can remember; tax rates for sellers are low; foreign buyers lurk behind every corner; and the stock market is supporting earnings ratios that almost defy description. On top of all that, inflation remains in check, the economy appears to be gaining strength and the supply of seller surrounds us.

So, why not get in on a good thing? Well, there are a few reasons to be cautious.

Besides the army of competition from business valuation firms and other CPA firms, and the training and experience necessary to do the job, there are legal and financial risks. Among the risks are licensing requirements, due diligence requirements and financial responsibility for obtaining or using confidential information.

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Still, if you're confident in your abilities and want to increase your value to clients, suggest to them a valuation study, which can serve as the first step of an examination of exit strategies or business succession plans.

Be aware, however, that the process of seeing a business through its sale can take anywhere from a few days to more than a year for more complicated deals.

FIRST STEPS

Some of the more obvious services CPAs are trained to offer business sellers include comparative exit strategies; valuations; developing criteria for buyer selection; financial evaluation of potential buyers; tax structuring; tax and accounting review of transaction documents; negotiations with potential buyers and lenders; and monitoring earn-out provisions.

If your client agrees to a valuation study, the first task is to prepare an engagement letter detailing the services your firm will provide, with each service priced separately, then get the letter signed by the client.

Next, assemble a team of qualified professionals, rather than have your firm attempt to cover all the bases. At a minimum, the team ought to include an attorney and an investment banker, who can help with legal requirements such as drawing contracts or those tasks that require licensing.

Also, there is a veritable thicket of security rules and regulations related to raising capital and brokering business sales that makes a professional who specializes in these areas the only logical choice for the team...