Small Businesses Need Better Financial Management

selling a company

There's a lot to consider about selling a company long before a buyer is found and the paperwork formalised. For example, why does a business owner want to sell? Who will the business be sold to? The many questions surrounding small business sales have to be answered by both parties of a transaction. Among those questions are those having to do with financial management.

Small business financial management is a real concern for both sellers and buyers. Unfortunately, a recent small business survey shows that business owners struggle with day-to-day finances more than they should. Among the 1,000 participants, nearly 30% said that daily finances were one of their biggest concerns. An almost equal number of owners of companies with annual turnover of £10 million or moreadmitted they were troubled by financial management.

The fact that financial management is such a problem is something to consider before selling a company. Why? Because financial management is as important to a business's current owner as any potential buyer. Poor management on either end of the transaction could doom the future of the company being sold.

From the Owner's Perspective

Knowing when to sell a business is not an easy thing. In my time as a consultant, I've come across numerous owners looking to sell because they were having issues with financial management. In some cases, the sales were completely justified. In other cases, they were not.

If an owner is looking to sell a company simply because he or she is having trouble with financial management, he/she may be short-changing his/her future unnecessarily. Perhaps it might be better to work with a business consultant capable of helping the owner better manage finances and turn the company around. Selling just to avoid financial management issues can seem like cutting off one's nose to spite one's face.

From the Buyers Perspective

What about those times when a business owner is selling a company that is otherwise healthy to a buyer who does not have adequate financial management skills? This could be an even bigger problem than the first. Buyers without good financial skills can easily run very successful businesses into the ground. We see it all the time.

Anyone planning to buy a business should already have a good track record of ownership and financial management backing up the purchase. In the absence of such a track record, it is incumbent upon buyers to make sure they are fully educated in day-to-day financial management before taking over. To do otherwise is to jeopardise the health of the business being purchased.

In the end, financial management plays a significant role in selling a company. It is important on both ends of the transaction. As an expert in business sales, I can help you understand when to sell a business you currently own. Should now be the right time, I can assist you through every step of the process. I am a specialist in this area as well as in mergers and acquisitions.

Sources:

Big Hospitality – http://www.bighospitality.co.uk/Trends-Reports/UK-small-businesses-admit-to-struggling-with-financial-management

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Author: Tim Luscombe

Hello, I'm Tim and I'm a specialist in corporate finance for the owner managed business. If you've been approached to sell your business, or you are thinking of buying a business or you just want to know what your business ...

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