Accounting and Valuing Your Business: DIY vs. Outsourcing
As a small business owner, it is extremely tempting to try to do everything ourselves, including accounting. When you first start or purchase a business, this is not necessarily a bad idea. You need to know how to at least do the basics and read the reports your accountant sends you to make sure they are handling your finances correctly.
But over time, you might have let that task go to a trusted professional, and while you should audit things from time to time, you don’t have to always look at every detail. When it comes time to sell your business though, you will need to be much more hands-on in order to determine both your business health and your business value.
We even offer a tool for free here at Rogerson Business Services, one that allows you to get a great idea of the value of your business in seven steps. This is not only a simple to use, a valuable tool that walks you through the process, the email course also informs you of exactly what documents you will need to accurately value your business when you are ready to sell.
When it comes time to gather those documents and recast your books to show the true income of your business, is it better to do it yourself, or outsource these accounting tasks? That’s a question only you can answer for yourself, but here are some things to consider.
Your Aptitude with Numbers
Some business owners are better with numbers than others are. The question is, which are you? How well do you deal with numbers and spreadsheets, and how accurate can you be? If one of the reasons you outsourced your accounting is not only that you don’t have time to do it or just don’t like it, but also because you are not the best at it, letting someone else handle this part of your business valuation process may be a good idea.
However, if you often audit your own books, are pretty good at it, and have a firm grasp of accounting, tax laws, and other business finance calculations, you may be able to handle gathering the documents you need and doing some of the calculations yourself. Of course, no matter what, you’ll want to consult with your business broker or your accountant along the way to make sure you are on the right track.
Your Time and How You Spend It
Unfortunately, it is not as simple as whether or not you are good with numbers or not, but it is also about whether or not you have time to gather financial data and enter it into the business valuation calculator we offer. Remember, even when you decide to sell your business, your number one priority is to run your business profitably. If you stop doing that to concentrate on the tasks of selling your business, your business will decrease in value, and in the end could end up not selling at all.
This is the beauty of outsourcing your accounting in the first place. Your time is likely better spent managing your business, attracting new clients, and serving your customers and employees and their needs. It’s not that you should not oversee the business valuation process: you should absolutely be involved.
But when it comes to the actual recasting of your books, gathering financial data, and crunching numbers, usually your business broker is your best resource for doing these things and making sure they are done correctly.
Your Objectivity in Valuing your Business
Everyone who has written a book has written a bestseller according to them, and according to nearly every business owner, their business is a success and imminently valuable. However, this does not always match the reality of how your business is operating.
If you can step back and get the big picture and be objective about the good and bad of your business, that is great. If you cannot, outsourcing that to someone else who can be is a much better idea. The simple reason is that they lack the emotional attachment you have to your business and can truly look at just the numbers and performance without prejudice.
It may even be tempting for some business owners to argue with their final business valuation when it is presented to them. Resist this temptation. Take a step back and consider some simple things before you disagree:
Try to look at the actual numbers without emotion. Cash flow, profit, and other items are of vital importance to a buyer. Look at things from their perspective.
Think about who is offering you this information. Your business broker or accountant wants you to have an accurate business valuation and overall picture of your business too. It benefits them as much as it does you.
Look for opportunity. When you get a business valuation, it can lead to either the decision that now is the right time to sell or that waiting and growing your company makes sense. Use these numbers as an opportunity to really evaluate your decisions.
Remember, your business valuation is just that: information to help you make a wise decision. If you are considering selling your business in a few years, it never hurts to have a business valuation each year, just so that you can determine that you are headed in the right direction. In fact, once you have our free business valuation tool, you can use it over and over again to evaluate your business over time.
Then, once you are ready to sell or you need a certified business valuation, if you are in the state of California, contact us here at Rogerson Business Services. If you have questions about business valuation or selling your business, need help, or are already ready to start the selling process, contact us here. We’d love to be your business broker and help you through every part of the sales process.