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I came across an article in Accounting Today written by a regular columnist, Gene Marks. Gene talks about a ‘friend’ who is looking to sell his business and retire but is finding his business is worth less than he thinks. There a few common reasons mentioned including:
- Non-exclusive product agreements
- Non-exclusive employee agreements
- No intention of staying on very long after the sale
- And the most important reason? The lack of any CRM or ERP software that captures the essence of their customer relationships.
The conclusion I draw from this article is one I’ve always thought, but is now being validated by a respected media publication.
If you plan on selling your business someday, among other preparation that your CPA can assist with, you need to have software and systems in place that can help the business run like a well oiled machine when you leave. A modern ERP/CRM solution will let you know about your customers as PEOPLE. What sports they like, what beer they drink, what their holiday gift preferences are. A new owner will know about past pricing and deals on a customer by customer basis. A proper ERP/CRM solution will allow a new owner (and maybe even you!) to take a vacation and know the place can run without the need for your approval on everything.
A proper system will give significantly more comfort to the prospective buyer’s CPA that the numbers your produce are accurate and reliable. Low end solutions like Quickbooks allow for too much ‘slight of hand’ or back dating to allow for a level of comfort in your financials that are trustworthy. Higher end solutions provide the ability to audit and trace where transactions came from and give the knowledge that they couldn’t have been changed, even by the owner trying to sell the business.
The summary is that if you don’t want to invest in the business for now because you think you can maximize your personal cash flow, than do so for your retirement. A business run on a low end accounting program, sticky notes, and Excel isn’t going to fetch much in the upcoming competitive market as the baby boomers are retiring and want to sell their businesses to a shrinking post baby boom buying population.
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