The Accountants Role In Business Transfers

A business associate recently sent me a ten-point list on the suggested Accountants’ strategy for selling a business against the clock. I sent an email back to him with my list that read:

1. Contact a Business Transfer Agent
2. End

This might have been slightly tongue in cheek, but it does indicate that accountants often get involved in business transfers when they have no specialist knowledge.

Accountants you see have very, very strange ideas about how much a small to medium sized business is worth, as their experience of valuation businesses is based around valuations of stock market or AIM listed businesses. So they apply the same “rules” to the valuation of smaller businesses.

You should for example ignore the valuation figures produced by this ready rekoner, as this overvalues a business by a much as two to three times.

The problem is that this particular accountant is not alone in overvaluing the small businesses, the number of times I have heard the sentence “But my accountants tells me…” I simply ask, “Is he a specialist in business valuations?”

The role of the accountant in business transfers should be to number crunch, not in the area of valuing businesses, as they have absolutely no experience in the field and moreover often get it badly wrong.

If your accountant is trying to sell your business, you probably will not be successful as it is likely to be overpriced. However, if you take advice from your accountant on how much you should pay for a business, you just might be paying way over the odds.

This entry was posted on 03/02/2009 at 11:58 am and is filed under Selling Your Business, Buyers, Business transfer agents. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response or trackback from your own site.