Get your figures ready before a buyer asks.
A buyer's accountants will test your accounts and monthly figures against each other. The Finance & Information Readiness Review gets your accounts, monthly figures and forecasts in order first.
It suits owners whose figures would not yet survive a buyer's questions. The earlier you start, the better.
£2,120 + VAT, a fixed fee. Buying a preparation service does not commit you to selling, or to selling through Reads.
Buyers read your numbers first
A buyer's accountants go through your figures, and most buyers look at the previous three years of profit as well as at the outlook.
The bars show how the profit in your accounts becomes the profit a buyer prices.
Profit in your accounts
The starting point. A buyer's accountants check your monthly figures against these accounts before they rely on them.
One-off items
Advisers show underlying performance, leaving out one-off items, and look for evidence that backs up what they are told.
Your own pay at a commercial rate
Directors' pay is set at a commercial rate for the work actually done. That can move profit up or down.
Profit a buyer prices
A headline price is commonly linked to normalised earnings, which is profit after adjustments such as one-off income or costs, with a multiple applied. A multiple is a number of times the yearly profit.
Three years of accounts that agree
Companies must file accounts every year, and a late filing brings an automatic penalty. The law also asks for the same accounting policies from one year to the next. A buyer's accountants look at any change in policy and leave its effect out when they show underlying performance.
Monthly figures for this year
Advisers look at trading trends in the current year's management accounts as well as the earlier ones, and they check the management accounts against the year-end figures before relying on them. Management accounts are normally prepared monthly, while cash moves every day, so a month-end balance sheet can hide the swings.
Profit after adjustments
Advisers separate one-off items from underlying performance, set directors' pay at a commercial rate, and look for evidence that backs up what they are told. Personal spending paid by the company has to be allocated correctly, either as pay or through the director's loan account, which records money moving between you and the company. How that is taxed is a question for your accountant.
Income you can show will continue
Advisers read your main contracts for their pricing, payment terms and duration. Customer analysis covers how concentrated revenue and profit are, how loyal customers are, how many leave (known as churn), and how the customer base has changed over time.
Where one customer or a few supply much of the income, a buyer may speak to them to test how long that revenue will last.
Cash and working capital
Working capital has no legal definition. In a sale it is generally stock, money owed by customers and bills you have paid in advance, less money owed to suppliers, costs not yet billed and payroll liabilities. A buyer's offer usually assumes the business comes with a normal level of it.
A forecast that holds up
Advisers look at the assumptions behind a forecast and at how accurate past budgets were, and a buyer may arrive with its own projections built on different assumptions. A lender may ask for a cash flow forecast too.
Where the price can move
These are the places where what you receive can differ from the headline offer.
Working capital at completion
If the level at completion is above or below the normal level, the price is adjusted. What counts as normal is a matter of judgement, so it helps to know your own level, and why it moves, before anyone proposes one.
Money received in advance
Cash received before the work is done is often argued over. A buyer may treat it as debt it inherits, because it must deliver the work; a seller may treat it as a normal part of the cash cycle.
Deferred and conditional payments
A sale agreement can include earn-outs, where part of the price depends on how the business performs afterwards, and provision for liabilities that were not fully priced in. Knowing what you would walk away with, before you say yes, is part of the review.
What the review does about each
It starts with a free first conversation about how your figures are kept today and when you might sell. You send your accounts, monthly figures and any forecast or budget. The specialist works through your reporting, forecasts and the evidence behind your profit, then talks you through a written assessment.
What the review covers
Getting your numbers ready
Bookkeeping, and monthly and quarterly management accounts. KPI reporting covers the few measures that show how the business is doing. Variance analysis checks actual results against budget or forecast and finds out why they differ.
Lifting what the business is worth
Profit margin analysis shows where you really make money and where you do not. Budgeting and forecasting give you a plan to work to and keep current, and a cash flow forecast shows what is coming, month by month.
Weighing up the offer
Scenario analysis models each offer, covering cash up front, deferred payments, which are paid after the sale closes, and earn-outs, where part of the price depends on how the business performs afterwards. Decision support tests the numbers before a decision such as hiring, pricing or a new investment.
You come away with a clear assessment of what your reporting does well and where the gaps are. It lists the improvements to make before a sale in order, and keeps quick wins apart from the deeper work.
When to do what
Start where your timescale fits. The order runs from the history, to the outlook, to the answers.
Three years out
Make the history clean
- Accounts filed on time, on the same accounting policies each year.
- Monthly figures that reconcile to the year-end accounts.
- Personal spending and directors' pay recorded so each can be explained.
One year out
Show where the business is heading
- Current-year monthly figures and trends beside last year's.
- A forecast and a cash flow forecast, with the assumptions written down.
- Your normal level of working capital worked out, and why it moves.
- Contracts and customer records in one place.
At sale
Answer questions quickly
- Figures ready for the data room, the online folder a buyer's advisers read, with a clear view of what goes in and when.
- Each adjustment to profit explained, with the backing to hand.
- Offers compared on what you would walk away with.
Security: what to have ready
Beyond the general checks, these points come from how security work is approved, monitored and paid for.
Approval and a change of ownership
Security Industry Authority approval is granted to one legal entity. If services move to a different entity after a merger or takeover, a fresh application is needed. A merger, acquisition or change among the people who control the company must be notified to the Authority. NSI approval cannot move to another legal entity or be bought as an asset, except with NSI's prior approval in exceptional circumstances. A change of ownership or control must be notified to NSI. Take legal advice on how the sale is structured.
Financial standing
The Authority looks at a business's financial circumstances, including up-to-date Companies House filings and tax compliance, and its approval standard covers financial management. NSI approval needs a sound financial standing. Tidy filings and records matter for approval as well as for a sale.
Monitoring and the police response
In England, Wales and Northern Ireland, police response to a monitored alarm depends on installation, maintenance and monitoring being certificated by a body accredited by UKAS, the UK's accreditation service. It also depends on a recognised alarm receiving centre, which monitors the alarms. A change of maintainer or monitoring centre has to be notified to the police force.
Wages and contract changes
Statutory minimum pay rates change every April, which moves the wage bill on a guarding contract. Payroll liabilities count as part of working capital in a sale. When a guarding contract passes to a new contractor, the staff on it may transfer under TUPE, the rules that protect employees when a service changes hands. Take legal advice on how TUPE applies to you.
Who leads this
Ben Davies
Financial Preparation Specialist
Leads the financial preparation review: the accountancy side of the Reads Pre-Sale Programme, positioning your business to maximise its sale value.
Tax and legal advice comes from your own specialists, and who you need, and when, is set out for you.
What happens after
If the value is below your hopes, the Exit Strategy Workshop plans the work on value; you may need either or both. The programme follows, priced to your plan and paid monthly. When you are ready to sell, the Full Value & Sale Readiness Review checks the whole business.
Questions owners ask
What does it cost?
£2,120 + VAT, a fixed fee.
Does buying it commit me to selling?
Buying a preparation service does not commit you to selling, or to selling through Reads.
What do I need to send?
Your recent accounts and monthly management accounts, and your latest forecast, budget or cash flow if you have one.
When should I do this?
Any time the figures need work. The earlier, the better.
Do you give tax or legal advice?
No. We will tell you when you need it, and work alongside your own accountant and solicitor. Who you need, and when, is set out for you.
Is this the same as vendor due diligence?
No. Due diligence is the checking a buyer does before a sale completes. A vendor due diligence report is commissioned by the seller to inform buyers, and the team writing it has to stay independent. This review gets your own figures in order, and buyers still carry out their own checks.
What will I come away with?
A clear assessment of what your reporting does well and where the gaps are. It lists the improvements to make before a sale in order, and keeps quick wins apart from the deeper work.
Take the details away
See where your figures point today.
The calculator gives a range from your turnover and profit in a few minutes. If you would rather talk, start with a free first conversation with Simon or Emily.