How Properly Prepared Finances Could Earn You $1M

About the Episode

Half of business sales fail due to issues buyers uncover during financial due diligence, but being prepared for due diligence can lead to higher sale prices and a smoother transaction. In this episode, CPA and due diligence expert Bill Wiersema discusses inaccurate revenue recognition, non-compliance with state and local tax laws, and how sellers can increase their business’s value by addressing accounting changes, tax compliance, and non-recurring items. 

Sellers that are prepared for due diligence can enjoy half a turn to a full turn multiple higher than those that aren’t.

Bill Wiersema

What You’ll Learn

• Common Reasons for Deal Failures: Failures often stem from financial due diligence findings, as sellers often focus on personal planning rather than financial issues, and buyers will terminate deals even over minor collective issues.
• Seller Preparation and Due Diligence: Well-prepared sellers are not only more likely to attract serious buyers but also tend to achieve higher sale prices. Investment banks often mandate this preparation to prevent deals from being derailed by unforeseen problems stemming from an unprepared seller.
• Accounting and Tax Compliance Issues: Accounting concerns include proper revenue recognition and adherence to evolving accounting standards. Tax compliance, especially state and local tax (SALT) obligations.
• Revenue Recognition and Compliance: Accurate revenue recognition, particularly under the overtime method, is critical, requiring sellers to meticulously document costs and budgets.
• Non-Recurring Items and Add-Backs: Sellers must ensure that all proposed add-backs are clearly quantifiable, justifiable with supporting documentation, and credible to prevent the deal from collapsing during due diligence. 

Topics Covered

Want More? Related Resources: 

• M&A Due Diligence Preparation
• Adjusting Financial Statements: A Complete Guide
• Preparing Financial Statements When Selling a Business
• Top Financial Challenges in Selling a Business

Meet Our Guest

Bill Wiersema

CPA with Miller, Cooper & Co. | Chicago, Illinois

Bill Wiersema is a CPA with Miller, Cooper & Co., specializing in M&A financial due diligence. He is also the author of several books on finance. He has assisted middle-market companies, private equity groups, financial institutions, and international entities across Asia, Europe, and Latin America. Bill has extensive experience assisting sellers across diverse industries in preparing for sale, conducting due diligence, creating business plans and projections, assisting in negotiations with financial institutions, and advising clients on post-acquisition financial issues.

LinkedIn: https://www.linkedin.com/in/billwiersema/