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Podcast 34 – Preparing Your Financials Ahead of a Sale

On this episode of #PoisedforExit, we featured Kyla Hansen, partner at JAK CPA's. Kyla's firm works with privately held companies and they're very busy helping their clients prepare for a future acquisition

Kyla says that a business owner should get their financials cleaned up at least 3 years ahead of a sale, but even better to do so 5 years ahead of a sale in the wake of COVID. She said that many buyers are now looking back 5 years, where they are careful to scrutinize how the business did before and after the pandemic.  If a company was quick to bounce back or actually grew during the toughest times, they are deemed a prime candidate to be acquired. 

She also discussed why a seller would prefer a Stock sale over an Asset sale, and why a buyer would prefer the opposite. It all has to do with taxes and liabilities. There can even be situations where a seller may opt for a Stock sale but elect to treat it as an Asset sale at tax time. 

Kyla sees a lot of seller financing with smaller acquisitions. There are ways to mitigate the risk to the seller in these situations and sellers should be mindful of and take action on those opportunities. 

A big stumbling block for many entrepreneurs is knowing the Basis or cost of the asset of their business. When, how much and how often did the seller invest in the business? Unraveling this to get to the real number when a sale comes around is best done well in advance of the sale, so the seller can plan for what's to come from a tax standpoint, among other matters. 

Kyla did remind us that taxes will be going up in 2022 for sure, so if you have any deferred income you should probably take it sooner than later. 

JAK CPA's will be 90 years old this year and celebrates many generational companies they have worked with during this time. To have so many family businesses succeed into their next generation, says something about their expertise.  Listen here for more advice from Kyla Hansen. 

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Julie Keyes
Julie Keyes

Founder & Owner at KeyeStrategies, LLC

Julie is a Certified Exit Planning Adviser and Value Growth Advisor with 30+ years of experience. She works with business owners who seek to understand and maximize their exit and critical transition options.

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