Buying a business | 3 min read
Not all accountants are created equal when it comes to helping you buy a business. You need one that has the specialised skills and expertise to make sure your purchase goes as smoothly as possible.
Amanda Newton, a specialist from cloud-based accounting software company, Xero, shares her top tips on what to look for in an accountant who truly understands small business.
A good rapport
According to Amanda, the number one factor to consider when choosing an accountant for your small business purchase is whether you have a good relationship with them.
“The rapport you have with your accountant is really important. This is going to be someone you’re going to work closely with on many of your business activities, so it’s important to start with someone you feel you can work with and trust.”
A specialist in purchasing small businesses
An accountant who specialises in small business buying will be able to give you an idea of the company’s future earnings and financial needs. They’ll have a deep knowledge of key business metrics such as ratio of salaries to total revenue. They’ll work with you to analyse the balance sheets, income and cash flow statements, and tax returns to determine the health of the business for sale, as well as assess all assets and liabilities.
An accountant who specialises in small business can also provide advice to help you write your business plan and explain the legal business structures available (e.g. sole trader, sole proprietor or limited liability company). “This detailed professional evaluation will help you reduce the risk of making a bad purchase or paying an inflated purchase price.”
You’ll also be looking for an accountant who has a background in the industry you’re interested in.
“A qualified accountant who has experience in the industry you’re looking to go into can add value to your business beyond accounting advice, such as shedding light on how others are performing in your industry or helping you understand what’s normal and what’s not in that industry.”
For example, if you’re purchasing a retail business you’ll want to make sure your accountant knows which method your peers are using for determining the cost of goods sold and for calculating and tracking inventory. You accountant should also be able to tell you what the industry standard is for payment terms.
How they run their own business
You might also consider how successful your accountant is at managing their own business. For example, if you’re a graphic designer you might pay particular attention to the accountant’s website or to discovering how well they understand technology.
“Ideally you’ll want to choose an accountant who is at the forefront of their industry because if you’re going to be getting advice from an accountant on how to run your business, you’ll want to make sure that they’re running their business well too.”
Are they technologically savvy?
Digital disruption has changed the way accountants operate and run their businesses these days. Today, companies such as Xero have enabled accountants to operate from anywhere, which means many highly skilled accountants are able to be more versatile and flexible than they have been in the past.
It’s worth investigating whether your prospective accountant is up to speed with cloud-based accounting software and Skype. This will allow you to share information in real time so you don’t have to waste time commuting.
Choosing the right accountant
As one of the most important advisors you’ll need for your small business purchase, you’ll want to take your time selecting the right person. Knowing what to look for will help you find an accountant who not only has the relevant skills and experience but who can also do business with you on your terms.
Want to find out more about buying a business? Check out our ultimate guide on how to buy a business.
Three vital questions to ask an accountant to find out if they're right for you.