From Startup to Sell-Off: How Accountants Guide an Exit Strategy from the Start

When budgeting and planning your finances, it is common to concentrate on the present or the next few years of your company’s life. As a result, exit strategies are often an overlooked aspect of accounting. Planning for an exit strategy doesn’t necessarily mean you are ready to sell your business. However, it can be advantageous to begin considering your company’s future early on.

Having an exit plan can increase the company’s value and make it more attractive to future buyers or successors. Preparation can even help ensure that mergers or acquisitions go smoothly. Waiting until the owner is ready to exit without preparation can lead to missed opportunities and lower valuation.

Executing an effective exit strategy involves many steps, and accountants play a vital role in organizing finances. Let’s talk about a few ways that an outsourced accountant can assist your company in planning an exit strategy.

Financial Clean up and Accuracy
Any business owner knows that while running a company, it’s easy for things to get messy and unorganized. Sorting out your finances is helpful not only for exit strategies but also for clear communication during company life. Accountants can ensure that everything is not only up-to-date and accurate but also presented clearly, building credibility with potential buyers or investors.

Accuracy can also help when it comes to due diligence. If everything is in order, there will be fewer surprises to sort out during the due diligence process.

Valuation Support
Valuation is a great way to know how much your company is worth and to measure its performance. Knowing the value of your company can help you to make better-informed decisions, like attracting investors and negotiating mergers from a position of strength.

An accounting team will prepare and organize the financial data that supports business valuation, identifying areas that influence your company’s worth, such as revenue streams, expense trends, and profit drivers.

Tax Planning
When you are ready to exit the company, an accountant can help you do so in a tax-efficient manner. Through the strategic use of credits, deductions, and entity structures like asset vs stock sales, an accountant can help you navigate your finances more clearly and help you save your money as much as possible.

Hiring an accountant for this area can actually help you save money and even offset the cost of their services.

Due Diligence Preparation
One duty of an accountant is to gather and present financial documents. This includes answering questions from potential buyers or auditors and ensuring the business withstands scrutiny during the due diligence process.

Professionals like a CFO and controller work consistently to organize your financial records to assist with the due diligence process and ensure it runs smoothly and with as few errors as possible.

Deal Structuring Advice
Although they typically aren’t lawyers or investment bankers, accountants are trained in the appropriate laws and investment strategies, meaning that they can weigh in on the financial implications of different deal terms. They have the expertise and experience to advise you on earn-outs, seller financing, equity stakes, and how these things affect the seller’s bottom line.

Transition Planning
The transition for the business owner during an exit doesn’t have to be rocky. An accountant can assist them with their financial stability after the exit. This includes managing cash flow and investment strategies alongside finding potential reinvestment opportunities.

It’s essential to think of your future after selling a company, and an accountant is the perfect person to help you set up your finances for later opportunities.

Is Hiring an Accountant Worth it?
Yes, absolutely! These processes are complex and sometimes can take your time away from running your business.

Hiring a professional for an exit strategy is a wise decision. They are trained in the specifics of financial management and can ensure that everything follows the appropriate laws and regulations. Outsourcing to someone who is dedicated to the job can be both time—and cost-effective for your company.

If your company has reached a point where you are considering a merger, acquisition, or selling your business, then contact West to East Business Solutions today. We will schedule a free consultation to see if our services are right for you. Our goal is to help you navigate these challenges with a budget that is appropriate for your needs.