Six steps to the next level

As an owner who wants to expand your company, the idea of purchasing a competitor might seem appealing. Selling your company also might be appealing. But how?

Many people have opinions but if they don’t come from qualified professionals, that advice can be drastically wrong and end up costing you a lot of money via purchase price, payouts and/or taxes.

A good lawyer or certified professional accountant who specializes in transactional and tax structuring might be a sound start. But before contacting a professional, take a look at the purchase and sale process so you’re familiar. Here’s how it works:

1. Confidentiality agreement / information request. This is where we start. Most buyers and sellers would rather keep a deal (or potential deal) secret until it closes. What’s being sold? The information request defines all items for sale.
2. Letter of intent / due diligence. Once you understand what’s for sale, you can make an offer, which is done through the letter of intent. Due diligence determines whether the understanding of value on both sides (buyer and seller) is what has been represented.
3. Financing the deal. Is it all cash? Is it over time? What are the options, and how can that affect the value, as well as the ability to seal the deal?
4. Purchase and sale agreement. This is where the lawyers earn their money.
5. Other considerations. These might include such details as human resource issues, lease agreements, etc.
6. Closing the deal. This step is usually done with buyer and seller attorneys present.

Dan Gordon is a CPA in New Jersey and owns an accounting firm that caters to PMPs throughout the U.S. He facilitates several peer groups that help PMPs increase growth, profitability and accountability in their firms. Visit www.pcobookkeepers.com for information about his firm, PCO Bookkeepers. Gordon can be reached at dan@pcobookkeepers.com.