Accountant’s play a significant role in the acquisition of most businesses. You should not buy a business without a review of the books and records by a CPA. The benefits of their review will usually far outweigh the costs.
Likewise, the seller’s CPA can play a very productive role or they can kill your deal. They can help their client be realistic about the value of their company or they can pursue a hidden agenda.
Some CPA’s see the sale of the business as the potential loss of a client. They may also see this as the last opportunity to bill the client for their services and seek an active role in the process adding billable hours. An accountant may even inject ego into the mix as they seek to elevate their importance by advising their client that the business is worth significantly more than it is. This “Deadly Mix” is a deal killer. It occurs often enough that it’s worth addressing how the buyer can handle the “Deadly Mix” preemptively rather than waiting until it occurs.
It is important to handle this possibility preemptively because once the CPA tells the client that their business is worth more than it is, it is virtually impossible for the buyer to obtain a fair purchase price for the business. Even the next several potential buyers will meet the same obstacle. You cannot un-ring a bell.
So here is the approach I use to preempt this from happening in the first place.
There comes a time relatively early in the purchasing process when the buyer gets a copy of the financial statements of the business from the seller. It is important at that time that the buyer request permission from the seller to speak to the seller’s accountant regarding questions that the buyer may have regarding the financial information on the statements. More often than not, the seller will grant such permission and supply the buyer with their CPA’s contact information.
When contacting the seller’s CPA, the buyer’s mission is three fold:
1. Eliminate the CPA’s concern that they will lose a client. Let the CPA know that if you purchase the company, you will be looking to retain the CPA as the CPA for the company because of their familiarity with the books, records and other financial realities of the company.
2. Establish the authority by which the valuation of the business will occur. Ask the CPA if he will be advising the seller on valuation of the business. If yes, discuss which method(s) will be considered (ARM 34, P/E Ratio, ROI, etc.). Flush out how the CPA will justify their price opinion to the seller.
3. Establish the role and billing opportunity that the CPA has in assisting your purchase. Explain how by working together, you and the CPA can come up with an authoritative price that will be fair to both you as the buyer and their client the seller.
Remember, the CPA is a trusted adviser to the seller. Their words to the seller will always overpower yours in the seller’s ears. If you get out in front of the “Deadly Mix,” it will be your words, or at the least words influenced by you, that the seller will be hearing.
This is just one of dozens of enabling strategies for going into business for yourself that I teach in my online Bizar Financing course. Check out my free online video Getting Rich Your Way and see how other entrepreneurs are using my strategies to start, buy or build their own successful businesses using little or no cash of their own. And, how you can too!
