Selling a business successfully requires more than finding the right buyer. The better prepared the business is before a sale process begins, the smoother due diligence is likely to be and the stronger your position will be when negotiating value.

Ideally, business owners should start preparing at least 12 to 24 months before a potential sale.

Get Your Financial Information Sale Ready

A buyer will want a clear and reliable picture of how the business is performing.

This usually means having accurate and up-to-date management accounts, cash flow information, forecasts, margins, debt levels and revenue analysis by customer or service line.

A Fractional CFO can help ensure this information is produced consistently and that the numbers stand up to scrutiny. They can also identify items that may need to be adjusted or explained, such as one-off costs, owner-related expenses or unusual balance sheet items.

The aim is to avoid financial surprises once a buyer starts due diligence.

Review Customer Contracts Early

Customer contracts are often one of the most important areas of a sale process, particularly where the value of the business depends on recurring or contracted revenue.

A buyer may want to understand whether key customers have signed contracts, how long those contracts run for, what termination rights exist and whether there are any change-of-control provisions.

A Fractional CFO can help identify the most commercially important customer relationships and ensure the relevant contracts are reviewed well in advance.

Where contracts are missing, out of date or commercially weak, there may then be time to work with your solicitor to strengthen them before the business goes to market.

Identify Risks Before a Buyer Does

A Fractional CFO can also review the business from a buyer’s perspective.

This may include looking at:

• customer concentration;
• reliance on key suppliers;
• dependence on the owner;
• quality of management reporting;
• recurring versus one-off revenue;
• tax and CRO compliance;
• key employee arrangements; and
• any historic financial or commercial issues.

Identifying these matters early gives the business time to address them rather than allowing them to become negotiating points during a sale.

Build a Credible Forecast

A buyer is interested not only in historic profits but also in the future performance of the business.

A Fractional CFO can prepare a realistic financial forecast covering revenue, margins, costs, cash flow and profitability.

Importantly, the assumptions should be supported by factors such as customer contracts, sales pipeline, retention rates and expected pricing rather than simply assuming historic growth will continue.

A well-supported forecast can help a buyer understand the future potential of the business.

Prepare for Due Diligence in Advance

Once a sale process begins, buyers and their advisers will request a significant amount of information.

Rather than waiting for these requests, a Fractional CFO can help prepare the information in advance, including financial records, customer and supplier contracts, forecasts, payroll information, financing documents, tax records and company documentation.

This not only makes the process more efficient but also helps uncover missing information or potential issues before they are seen by the buyer.

Reduce Dependence on the Owner

Many owner-managed businesses remain heavily dependent on the founder.

This can concern a buyer if important customer relationships, financial processes or commercial decisions all rely on one individual.

A Fractional CFO can help introduce stronger reporting, budgeting, controls and management processes so the business is less dependent on the owner and better positioned to operate successfully after a sale.

Work Alongside Your Advisers

Preparing a business for sale normally involves accountants, solicitors, tax advisers and corporate finance advisers.

A Fractional CFO can help coordinate the financial side of the process and identify areas where specialist legal or tax advice is required.

For example, if a key customer contract is weak, the solicitor can address it. If a tax issue is identified, it can be reviewed before the transaction begins.

The objective is to resolve as many issues as possible before the buyer identifies them.

Start Preparing Before You Plan to Sell

A successful sale process is often the result of work carried out well in advance.

Bringing in a Fractional CFO 12 to 24 months before a potential sale can help improve financial reporting, strengthen customer contracts, identify risks, prepare forecasts, organise due diligence information and ensure the business is presented as strongly as possible.

At Gallagher Keane, our Fractional CFO service works with business owners to get their businesses sale ready and help protect the value they have built.

If you are considering selling your business within the next 12 to 24 months, speak to the Gallagher Keane team about how we can help you prepare.