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Spring Cleaning is Good for Business

May is a good time for spring cleaning, especially at your business. It is a good time to look at your business as though you were in the throes of due diligence. Here are a few areas to consider.

Inventory: Make sure your inventory records are up to date and accurate. Look at inventory like you would doing a spring cleaning at home. We often find inventory to be a source of conflict during a transaction, especially if the company has not taken a hard look at whether everything  is really saleable.

Financials: Messy numbers and casual accounting practices create headaches when it comes time to sell. Check with your accountant or deal advisor if you need suggestions.

Audited financials, on the other hand, can actually increase a buyer’s offer. We are seeing a growing number of companies doing quality of earnings review – which many accounting firms are now offering - so they see potential areas of concern or potential weakness likely to come up in diligence.

Hopefully, you have a good relationship with your CPA. If not, due diligence can be painful for all involved. Answers trickle in piecemeal, responses drag out, and parties on both sides get frustrated. 

Facility: Appearance matters. Make things neat and tidy. Buyers will always comment with pleasant surprise when a facility is clean and organized, with a logical place for equipment and inventory. 

We recently sold a manufacturing facility where the floors were painted beige. They were spotless, and the expensive machinery absolutely clean. Tours were positive – and memorable – experiences.

This goes for office teams too. If you have even one manager who hoards paperwork and lets things pile up, buyers will take notice. 

Digital: Get your computer records and systems in order. Make them accurately labeled and more intuitive, and that is going to make work more efficient for everyone too.  Having a common naming convention and storage system is helpful.

One company we have heard about has decided to make this  part of spring cleaning. On the other hand, doing this while things are saved on a daily basis will make the project less daunting.

Equipment: Sometimes old equipment is kept around, with the idea it might be put into use or be poached for parts. Good theory, but not always accurate. It can create an image of clutter and raise questions about asset values when the time comes for a transfer.

Most business owners would rather maintain employee jobs and sell a going operation than sell off the assets. Also, if there’s equipment lying around, it can raise the question of how much is needed to generate the revenue that is reported.

Best to keep the equipment that is in use and needed for operations, and to remove that which is not necessary for current operations. This eliminates a possible point of contention where owners want to extract value for assets that are not actively in use.

Attention to these areas prior to the time you are ready to go to market, will better position your company and help make the process to transition smoother.

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