Becoming a Better Business Broker Day 17: Working Effectively with Accountants

Welcome back to Becoming a Better Business Broker in 30 Days!

This concise series title describes exactly what we hope you get out it - becoming a broker that can close more deals with less work.

If you missed out our last article, make sure to give yesterday's article, Due Diligence Mastery, a read.

Today we discuss the best strategies for working with accountants, one of the primary decision-makers of a deal.

Understanding how to collaborate effectively with accountants can significantly enhance the value you bring to your clients and streamline the deal process.

Building a Strong Relationship with Accountants

• Understand Their Language: Don't be the broker that doesn't understand the difference between capitalizing an expense on the balance sheet vs. expensing it on the income statement - because they will see right through you. You need to familiarize yourself with accounting terminology and principles. This doesn't mean you need to become an accountant, but understanding the basics can facilitate clearer communication.
• Respect Their Expertise: A lot of Brokers (out of frustration) discredit an accountant's opinion during the deal process. The source of this frustration often occurs when a sell-side accountant says the asking price is too low, while the buy-side accountant will say it's too high 😂. While we recognize this is frustrating, remember their analysis can make or break a deal, so treat them as an integral part of your team.
• Communicate Regularly: Keep the lines of communication open. Regular updates and discussions can prevent misunderstandings and ensure everyone is on the same page. This is especially important when

Leveraging Accountants' Insights

Accountants are often a Buyer or Seller's most trusted advisor on a deal and for good reason - they are experts when it comes to the numbers. Leverage this expertise and partner with both sides' accountants to get the deal over the finish line:

• Valuation Support: Unlike many Sellers, accountants are financially fluent. Meaning, you can explain EBITDA and Financial Normalizations without needing to 'educate' them on the concept. As a result, accountants can provide invaluable support in business valuations, offering a trusted 2nd opinion of the valuation to their client. Tip: if possible, present your assessment of the business valuation in a joint meeting with the accountant and Seller.
• Financial Due Diligence: Work closely with accountants during the financial due diligence phase. Not only do they have full access to the business's financial records, they can also uncover potential red flags or areas of concern that need to be addressed.
• Tax Implications: Understanding the tax implications of a sale is crucial for both Buyers and Sellers. Especially for your Sellers, make sure they speak to their accountant before they list their business. Unfortunately, we worked with a client (due to poor tax advice) who had to pay an additional $250K in taxes on a sale price of $1.2M. In an ideal world (where this is avoided), the accountant can advise on structuring the deal in a tax-efficient manner, potentially saving your clients significant amounts of money.

Navigating Challenges with Accountants

• Discrepancies in Valuation: Sometimes, your valuation and the accountant's valuation may differ. When this happens, schedule a one-on-one meeting to review your assumptions, valuation methodology, and normalizations to calculate SDE and/or EBITDA. In many cases, accountants tend to avoid giving their clients an opinion of value (as a result of their CPA designation) so many come to the meeting with open ears (and others do not 😂).
• Distrust of Business Brokers: Unfortunately, some professions deem Business Brokers as finance's variant of a used car salesman. While that isn't true, this reputation doesn't help lead to an abundance of client referrals or trust from some accountants. Our advice to overcome this? Try and host a lunch and learn with the local accounting offices in your area. Bring a few case studies of successful deals, talk about the numbers (in detail), and the value you brought to the table.

Conclusion: A Synergistic Approach

Working effectively with accountants is about more than just leveraging their financial expertise; it's about creating a synergistic relationship that enhances the brokerage process. By understanding their role, respecting their expertise, and communicating effectively, you can ensure that the financial aspects of the deal are handled with the utmost professionalism and care.

As we move forward in our series, remember that every professional you collaborate with, from accountants to legal advisors (read about working with lawyers here), plays a crucial role in the success of your brokerage business.

Stay tuned for Day 18, where we'll delve into The Role of Business Acquisitions in Growth Strategies.

If you want to learn more about automating your business brokerage with DealBuilder, please visit our site or book a demo here.