Most business owners know that keeping up with the financial health of your business will help you succeed. What some business owners don’t always consider is that financial planning, forecasting, and modeling are essential to the success of any exit plan whether through merger, acquisition or ESOPs. In order to do all of those things effectively, you will need a CFO, the good news is, it doesn’t have to be a full-time CFO.
Outsourced CFOs can facilitate a successful exit.
With an Outsourced CFO, you get greater financial expertise, specifically a wide range of experience with M&A transactions, strategy, long-term financial growth, and years of leadership experience. Experience you would have to pay a steep price for to get full-time.
When a mid-sized business is readying to sell there is great importance on financial accuracy.
An outsourced CFO can help implement processes and procedures, provide cash-flow models, improve balance sheets, provide advice on market activities, and help strategize for the upcoming exit.
Ask yourself: Would a buyer be impressed by your financials?
As you approach an exit, the best way to start is to get your financials in order. When a buyer evaluates your business, you must have accurate and detailed financials in order. Accurate financials give the buyer a greater understanding of how well your business is functioning.
Let’s start with how your fractional CFO would prep your financials for the sale of your business.
You and your CFO will likely start by ensuring you are familiar with your most important financial statements. You need to know and understand your income statement, balance sheet, and your cash flow statement. All of these statements provide insight into how well your business is functioning day-to-day.
When should you begin planning for exit?
- Exits come in many shapes and sizes (as do businesses) for the best tax advantages, it is best to start planning 3 – 5 years before you anticipate a sale, transfer of ownership to the next generation, or acquisition.
- If your exit coincides with your retirement, you’ll want to put plans in place for the transition to a different lifestyle while remembering you will likely have some time required of you to stay in and help transition the company to its new owners.
- Looping in key players will keep the team together during the uncertainty of an exit. Speak to trusted advisors on ways to incentivize your key players to stay like golden handcuffs and deferred comp packages.
As you contemplate the next stage of your business, be sure to get the best advice, from lawyers to benefits brokers to a CFO, you may only exit one company in your lifetime. Make it count.