I want to continue discussing the role of advisors such as attorneys, accountants and business brokers in the business for sale process. The last post touched upon issues related to attorneys and, as expected, the feedback was not very positive about lawyers altogether. The overall consensus of readers mirrored my perspective in that attorneys can often times do more to divide the parties rather than unite them. In other words, they can be more inclined to be deal-breakers versus deal-makers.
Every buyer must engage an accountant to perform three specific functions: First, to validate the numbers that are being represented by the seller which is done during the formalized due diligence period. Second, to ensure the overall purchase price is broken down to provide the most effective tax scenario for their client (the purchase price allocation) and finally, to compile various future financial models so the buyer can effectively determine the viability of the investment.
The major misconception about accountants is their alleged expertise in business valuations. While I do not want to generalize their shortcomings because they do play a role, typically speaking, their take on valuations is completely skewered.
If you value a business giving too much weight to the hard assets, the money-losing one could, in essence, be deemed to be worth more, which is ridiculous.
I am a huge believer that business buyers must use accountants during this process. However, understanding and limiting their involvement to what they do best is paramount to successfully completing a transaction. They are not going to tell you whether or not to buy a particular business nor should they. They are strictly an advisory resource that if leveraged properly will prove to be a valuable asset to you.
Have a great week.
Author of the How To Buy A Good Business At A Great Price© series
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