How an Outsourced CFO Can Help Prepare Your Company for a Successful Sale

By Gene Godick | September, 11, 2023 |

For many business owners, their company is more than an asset; it’s the culmination of years of hard work and dedication.

When it comes time to prepare a company for a successful sale, this level of dedication needs to become a central theme in the sale readiness process. Preparing for the sale of the business is essential — and the financial health of a business will often take center stage.

During sale readiness, seeking financial expertise from outside the organization can be highly beneficial.

This is where outsourced Chief Financial Officer (CFO) services come into play.

Let’s explore these types of services and discover several different ways an outsourced CFO or sale readiness team can help owners like you maximize the value of your business through comprehensive preparation.

At G-Squared Partners, our Sale Readiness team has supported dozens of M&A transactions, some exceeding hundreds of millions of dollars in value. Our experienced professionals assist with various financial matters, from cleaning up a business’s books to leading the due diligence process on behalf of the seller.

Preparing Your Business’s Finances for a Successful Sale

Sale readiness is the first step in the long process of selling your business. Developing a solid financial foundation is critical to showcasing your business’s value to prospective buyers.

Just as a homeowner would make essential repairs and upgrades before listing their property, business owners like you must ensure that their financial house is in impeccable condition. This often involves much more than just highlighting current fiscal health but also reflecting the potential for growth and profitability in the future.

Every year, around 10% of all larger M&A transactions are canceled. An accurate and transparent portrayal of your organization’s finances can make or break a deal.

This is where the expert hand of an outsourced CFO in the planning process can prove invaluable. Research from Deloitte shows that over 90% of corporate leaders believe M&A outcomes hinge on proper planning.

To help you better understand what’s involved in this stage of sale readiness, here are a few key steps in the preparation of your organization’s finances.

Producing Financial Statements

Accurate and comprehensive financial statements are critical. In most cases, you’ll need multiple years, usually the three years leading up to the sale, of these essential documents to satisfy buyers and other related parties.

It’s also essential to restate any financial statements if they’re flawed or non-GAAP compliant. This proactive approach ensures transparency and helps you and your sale readiness team build a compelling narrative around the value of your business that the numbers can support.

One important element to consider is EBITDA add-backs, which add back additional expenses that more accurately reflect the profitability of your business. EBITDA add-backs can occur for one-time expenses which are not expected to occur in the future, such as legal fees or restructuring costs, or owner’s personal expenses, such as vehicle and travel expenses, that are paid by the business.

Developing KPIs for Buyers

Key Performance Indicators (KPIs) help buyers check the pulse of your business. While certain metrics, like revenue and growth rate, are staples, other metrics might offer buyers deeper insights into your company.

These could be metrics like customer retention or employee turnover. The nature of your business will determine which KPIs to highlight. Again, the expertise of an outsourced CFO or sale readiness team can help guide the KPI selection process.

Creating a Long-Term Business Forecast and Budget

While the current financial state of your business needs to be upfront and accessible, most buyers will find more interest in the future potential of your business. An outsourced CFO will help create robust forecasts to illustrate your organization's long-term value.

These long-term forecasts and budget breakdowns not only describe projected growth but also underscore the future viability of your enterprise.

Managing Routine Finance Processes

Consistency and efficiency in everyday financial operations are essential parts of sale readiness. Potential buyers gauge not just your current assets and revenue but also the operational efficiency of your business.

An outsourced CFO or sale readiness team can optimize these processes, helping address any potential gaps. They’ll often work with investment bankers to ensure financial data is readily available and paint a complete picture of your business’s health and potential.

Due Diligence

The due diligence phase is where buyers scrutinize every aspect of your business. This can be a daunting part of the sales process. Any discrepancies or oversights here can slow or halt a sale.

Being proactive is key. Working with an outsourced CFO or sale readiness team, you can ensure all your financial documents are accurate and ready for review. With the right experts on your side, you can address buyer questions and concerns confidently — which can help expedite the transaction.

Collaborating with Other Professionals

Hiring an outsourced CFO or sale readiness team can play an important role in building alignment between the various stakeholders in a transaction. Here are a few standout ways they approach this level of collaboration:

Managing Relationships with Stakeholders: efficient communication and trust are at the heart of any business sale. An outsourced CFO can act as a trusted intermediary who opens lines of communication between sellers, bankers, and other stakeholders.
Collaboration for Efficiency: the sale process is complex, often involving intricate legal, financial, and strategic considerations. With experience working with professionals like lawyers, business brokers, and investment bankers, an outsourced CFO brings the know-how to get things done.
Providing Financial Insight and Negotiation Support: an outsourced CFO is pivotal in providing expert financial advice. They’ll work alongside the selling team during negotiations, crafting compelling arguments to ensure your business is represented in the best possible light.

In short, an outsourced CFO or sale readiness team will act as a linchpin for the sale of your business. They ensure that you can navigate every aspect of the sale with precision, expertise, and cohesion among all involved parties.

Outsourced CFO Services from G-Squared Partners

The journey to the successful sale of your business is complex. It demands not only diligence but specialized financial expertise.

An outsourced CFO will play a critical role in this journey, ensuring every element of your business’s finances is ready for buyer scrutiny and can effectively showcase the value and future potential of your business.

Their support goes beyond numbers; outsourced CFOs can manage stakeholder relationships, provide critical financial insights, and offer support during negotiations.

If you're a business owner exploring the sale of your organization, having experts on your side can make all the difference. With G-Squared Partners, you're not just securing financial expertise but partnering with a team dedicated to maximizing the value of your business.

We’ve supported clients through more than 50 M&A transactions and can provide customized services to streamline the sale process. We can build an efficient and comprehensive plan to realize all your financial goals.

Ready to get started with the sale readiness process? Connect with G-Squared Partners today.