Ask the Experts is an interactive section that allows readers to ask direct questions to the experts at Kaulkin Ginsberg, the leading strategic advisors to the ARM industry, as well as other seasoned industry executives.

Thank you to one of our readers for our latest question:

Question: I want to retire in a year or so, maybe sooner if I can find a buyer for my collection agency. Is there anything I should be doing to prepare for a sale?

Answer: (From Michael Lamm, Kaulkin Ginsberg)
If you are thinking about an exit in the next year or so and want to mitigate the possibility of a buyer getting skittish and walking away from a deal, there are a number of things you can do now to prepare. Here is one key point to consider:

Make sure your “financial house” is in order

I can’t emphasize this one enough. First and foremost, your company’s value is tied to its financial performance, so buyers need to feel confident that your numbers are reliable and accurate. We recommend that you have your financial statements audited or reviewed by an outside accountant for at least the most recent fiscal year – ideally for two fiscal years.

It is also important to have your CFO, controller, or external accountant determine the contribution margin of each client business stream and prepare a forecast with detailed assumptions for the next one to three fiscal years. This will give the buyer an understanding of future financial performance.

If you don’t already have one, have a CFO and/or a controller on board prior to your company sale. Of course, you’ll need to do this far enough in advance so that the person is up to speed on your business and the ARM industry. Having someone in this capacity is critical for addressing financial questions and spearheading financial due diligence before and after the Letter of Intent.

As a general rule, keep in mind that buyers don’t like surprises. If you want to get to retirement faster, an experienced advisor can help you prepare for a sale, and then efficiently navigate through the inevitable twists and turns along the way.

Michael Lamm manages M&A transactions and valuations for Kaulkin Ginsberg. Michael can be reached at 240-499-3808 or by email.

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