Last blog I wrote about a good sign, when a potential buyer and a seller like each other. This blog is about bad signs, and the longer we do this (16 years this month!) the more easily we recognize them.
It’s generally a bad sign when you ask to see an owner’s pertinent business data and they approach you with a plastic grocery bag stuffed with paper (it’s happened), or confess that they haven’t filed a tax return for the last 3 years (ditto), but there are other bad signs when it comes to accounting practices that are not quite as blatant, but in a way, scarier.
Fred has kept the books using QuickBooks software for all the businesses that we’ve owned, and we’ve had an accountant – the same one for 20+ years – do our taxes. Fred views the numbers the way that I did as a sales manager: A single good or bad day doesn’t make a big difference in the scheme of things, because trends evidence themselves in months, quarters, and years, and that’s when we take time to drill down and compare to history. It’s been a successful process for us, but not everyone has the time nor desire to do their own books, in which case they have an accountant do it for them. We believe that owners should engage accountants and other professionals to make sure that they’re protected, legal, and headed in the right direction, so that’s a good thing.
But the bad sign that always amazes us is when a business owner can’t get the information that they need from the people that they pay to keep that information current. They seem okay with accountant excuses for not having Profit & Loss statements for the last two years, or having numbers that are current only to May of 2018. They seem nervous about pushing their accountants – again, people that they’ve hired – to provide them with the data that they need in order for us to move forward. We’re astonished by this. It makes us wonder what those books must look like, or what an accountant is attempting to hide. Often these potential clients will disappear as we keep asking them for updated information, but we can’t sell them if we have nothing to share after a potential buyer signs an NDA.
So there’s a lesson there: Know your numbers. Maybe you don’t want to engage with them from a profit vs. loss standpoint, but we can’t help sell your business without them!