Selling a Business – “Don’t Run the Numbers”
SELLING A BUSINESS – “DON’T RUN THE NUMBERS”
When I say “running the numbers” I mean manipulating financial results to try to increase the purchase price. Prime examples include; (i) pushing sales into an earlier or later period; (ii) collecting receivables at earlier dates; (ii) keeping cash and not paying accounts payable; (v) manipulating inventory amounts and values; and (v) reducing staff and adjusting SH salary to increase earnings. All of these approaches are short sighted and do nothing to fool buyers. What it does is make a buyer leery of how the seller is accounting for its operational results. Not a good start since trust is an essential element in getting a deal done. Sellers should not “run their numbers.” Most buyers are professionals at analyzing seller operating results and will see right through any manipulation of the numbers, especially as it affects valuation.