A contractor (who is not a client) had good profits and profitability for the past several years. He negotiated a deal to sell his company. The process began in April and the April financial statements showed the company profitability. The business valuation and sales price was based on the April and previous years’ statements.
The week before the deal was to close on October 1st, the financial statements showed that the company lost money from April to August, cutting the revenue and profits by more than 50%. The deal was called off.
What happened?
The owner stopped paying attention to his business operations. He was so enamored with the idea of selling and focusing on the many long discussions which took place, that he didn’t pay attention to business. He “took his eye off the ball.”
Since he was the person responsible for the majority of the sales, revenues and profits suffered significantly.
Be prepared for swinging emotions and distractions if you are planning to sell your business.
You must keep focus on operations while the process is taking place. During the due diligence process there will be a lot of requests for information and documents you’ll need to provide. There will be long hours of discussions. It may seem never ending and try to suck up all of your time.
You still have to pay attention to business. You must continue to operate your business and produce profit and loss statements and balance sheets each month…and review them.
There are no more time excuses for financial statement review – you can analyze them in less than a minute if you are on QuickBooks On-line (about 5 minutes for other accounting software versions). Go to www.financiallyfit.business to subscribe.
Over the years, many of the contractors I’ve worked with have been through this frustrating due diligence process. It is long. It is painful. However, the reward for the years of hard work building a profitable business comes when the business is sold and the money hits your bank account. You have achieved your goal and are on to your next phase in life.
Thanks again for reading Financially Fit Business. I appreciate you!
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