Making Financial Repairs before You Sell

PR firms must repair financial issues before presenting the agencies to prospective buyers. Presentation becomes a major concern for a seller anticipating close inspection from prospective buyers. And it’s only natural to try to display your best face when you’ve decided to cash in your most valuable asset.

How do you prepare when that asset is a PR firm?

There are several steps you should take when you believe you might be ready to sell. The end result should be that you gain the prospective buyer’s trust and confidence. PR firm principals should first and foremost be aware of any gaps in their financial statements. There may be many.

The Types of Financial Data Buyers Want to See

Your firm’s accounting records need to be in perfect shape before you start talking to possible buyers. You should have CPA financials. Unfortunately, many firms don’t have CPA financial statements, and that immediately makes them lose credibility in the eyes of buyers. Without professional financial statements your firm looks amateurish and sloppy. You immediately lose value, both tangible and intangible.

Staying on top of record keeping throughout the life of an agency can make a big difference in the long run. Financial statements come in three levels of rigor.

The first type is certified financials. These are statements that have been audited by the CPA. The highest level of financial statement is a must for really large firms (i.e., those with more than $30 million in net revenues).

For medium-sized firms (with revenues between $20 and $30 million), a Review Report demonstrates that a CPA firm has signed off on the financial statements and assumed a level of accountability. Review Reports are generally affordable for most PR agencies and can be completed by most CPA firms. A Review Report has major credibility with buyers, bankers, and other third parties. A Review Report includes full disclosures and footnotes.

The last and lowest level of financial statement is a basic compilation, which a firm generates itself. No serious buyer will accept these statements at face value. Buyers will generally want to view detailed statements that date back at least three years. They’ll also want interim financials for the current year.

I recommend that firm owners run their businesses as if they were selling them tomorrow. As a business owner, that thinking will put you in the right frame of mind for running a tight and efficient ship, with high-quality, professional financial reporting. When it comes time to sell, you’ll have much less work and fewer repairs to fix. Most importantly, your firm’s performance will likely be stellar.

 

 

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