Why your accountant can help you succeed at succession

Grant Linton highlights the important role your accountant can play when the time comes to sell your business to a new owner.

It’s a little like doing your will and deciding who to leave your worldly possessions to. Only when it comes to who to leave your business to – yes, the one you’ve built up over many years of blood, sweat and tears – it can be even more emotional and complicated. 

Who do you trust? 

Does that person have the passion, drive and capability to run the business? 

Will my kids disown me if I hand the reins over to my old mates Mike and Maxine, who have a small share in the company?   

Succession planning is a big issue, especially now with so many SMEs owned by ‘baby boomers’ who are retiring in ever-increasing numbers. 

And because baby boomers in general are self-assured and competitive, with strong work ethics, many leave it far too late for the changes that need to happen to successfully hand over the business. 

It’s hard to let go. 

The thing is, if you don’t start making plans to let go, you may not be able to put your feet up with the rewards you deserve, and the satisfaction that your old company will continue to grow and thrive.

However, help to plot a successful succession plan is on hand from an unassuming source.   

Your trusty accountant knows you better than you might think after years of presiding over your compliance and financial matters. Accountants and accounting firms are privy to information that ensures they have intimate knowledge of financial performance, tax details, insurances, business relationships, and much more. 

Many accountants joke about being a counselling service. Well, these days they are. They’re not rated as one of the most trusted professions in the world for no reason. 

People discuss things with their accountant that they wouldn’t share with their best friends. 

Who else knows your bank balance? Your level of borrowings? How profitable and wealthy you really are?

So, what better person to help you hand the business over to the right person? And who better to help maximise the value of your company so you get top dollar when it comes time to sell? 

It will mean you can regale your mates at the retirement village with stories from the glory days – about when you built a successful business that continues to thrive into the future.

Beyond numbers

An accountant’s role these days is more than just number crunching. Automation and advancements in accounting software has freed up their time, allowing them to broaden their roles to become fully-fledged business advisers and, if necessary, guidance counsellors to their clients.     

This expertise in data mining and analytics, coupled with an in-depth understanding of their clients’ personal and business finances, can be used to set your business up for the future.   

A good accountant is emotionally in tune with their clients and takes a broad interest in their entire life goals and dreams – not simply keeping the tax man happy.

Besides, more and more, answers to a business owner’s financial questions are being made available online so accountants are developing skills necessary to add real value as expert coaches and communicators, using their experience to tease the ‘real’ answers out of their clients. Because let’s face it, business owners are specialists in their field and well qualified to come up with the best answers.

And when it comes to the grunt work of getting a succession plan sorted its second nature for an accountant to help make it happen. 

Succession plan

Ideally an exit strategy should be established at the time of setting up a business venture – but this is rarely the case. At the very least you should have a succession plan in motion three to five years before selling the business.

For starters, new technology and accounting software enables businesses to keep records and data in good shape and streamline processes, which is essential to maximising the sale of a business. This can encompass everything from keeping contracts and records up to date through to recording all transactions, which is essential to accurately promoting the health and performance of the business. 

The bottom line is, if your systems and processes are in good shape then it makes your business scalable and less reliant on you, which is a far more attractive proposition for the newbie looking to take it on. 

An accountant is also well placed to: 

• Provide business valuations based on benchmarking other businesses in similar industries.

• Establish current value based on a number of key performance indicators such as revenue, EBITDA, as well as non-financial considerations.

• Assess growth potential, the scalability of the business, and dependence on the owner to further establish a company’s current value. 

But perhaps the real value of a modern-day accountant is when the time comes to discuss the desired outcome – and sale price – with the business owner, which establishes the ‘value gap’.

Then, working together, they can put in place strategies to increase the value of the business prior to selling – which can include everything from sharpening up day-to-day operations through to implementing tax efficient structures to maximise proceeds from the sale.

And once you’ve (hopefully) made your millions with a successful sale, the proceeds need to be invested and protected with a financial plan that will ensure you and your nearest and dearest have enough cashflow to fund your lifestyles for many years to come.  

A particularly tricky bit to navigate is when family and extended family are involved, with many different agendas and outcomes in the mix. For example, the older brother and daughter-in-law may want their money out, yet the younger son is determined to continue on the family business.

A fair result

Accountants spend considerable time facilitating family discussions and negotiations. Their skill is to bring about an outcome that is reasonable, with everyone getting a hearing. 

Because whilst it may seem like a money talks situation, it often has very little to do with hard numbers. People just want things to be fair, and to get a result that is best for them and their family. 

And this is where your emotionally-in-tune accountant will come in useful once again.

Grant Linton is general manager of Reckon Accountant Group.