The Difference a Virtual CFO Makes When Buying or Selling a Business

Mergers, acquisitions, or selling a part or whole of a business are likely to be some of the most significant decisions an SME will face. These processes, while full of potential, are riddled with complexities that can easily overwhelm a business owner and the leadership team.

Some studies from the Harvard Business Review indicate that 70% to 90% of mergers, acquisitions, or sales fail to achieve their intended goals due to poor integration and a lack of proper financial structure. Often, this is because business owners underestimate what’s involved. With a strong grip on logic, they tend to believe they can handle these processes themselves. Or with the support of an accountant only. Big mistake!

Ideally, a small business in the position to merge, acquire, or sell its operations has a CFO participating in the process to ensure the full potential of the deal is realised. However, the reality is quite the opposite: most SMEs don’t have a CFO. This is either because they don’t have the capacity to afford one or because there isn’t a need for such a position full-time.

So, how can an SME guarantee the best deal? This is where a Virtual CFO service steps in (and the sooner the better).

Why SMEs Need a Virtual CFO When Buying or Selling a Business

For SMEs, the expertise of a Virtual CFO can be the difference between a successful deal and a missed opportunity. Here’s why:

• Accuracy: A good Virtual CFO will have your numbers ship-shape which means investors, lenders and others can have confidence that the numbers you present are the real numbers.
• Objective Perspective: Virtual CFOs offer an impartial, objective viewpoint, helping business owners make decisions that are in the best interest of the business, free from emotional bias.
• Understanding Value Drivers: A good Virtual CFO will quickly identify and magnify the things that drive value in your business. They will – at least conceptually – understand how to unlock that value and guide your decisions to ensure you do.
• Flexibility: Though an earlier engagement is better, SMEs can engage Virtual CFO service providers only for the merging, acquisition, or sale process, ensuring they only pay for the services they need at that particular moment.
• Network: Good Virtual CFO service providers will usually have an extensive and valuable network that can be extremely beneficial to SMEs during the buying or selling process.

READ: Is your business sale-ready? Here’s what you need to know about selling your business.

The Role of Virtual CFOs in Buying and Selling a Business

When SMEs embark on the journey of merging, buying, or selling a business, the stakes are high. A Virtual CFO ensures that the process is not only smooth but also maximises value for the business. Here are the steps a good virtual CFO service provider will take to assure the best outcome for your business:

1. Setting the Foundation Right: Due diligence is a crucial step in any merger, acquisition, or sale. It’s about digging deep into the financial, operational, and legal aspects of the business in question.

• Financial Analysis: Virtual CFOs meticulously review financial statements, uncover hidden liabilities, and help to assess and articulate the true value of the business. This ensures that the SME is making informed decisions and communicating reliable information to other parties to the transaction.
• Risk Management: Identifying potential risks and liabilities early can save businesses from costly surprises down the line. Virtual CFOs are experts at spotting these red flags.

Learn how BridgePoint Group can help you selling your business.

2. Optimising Operations: The ultimate goal of any deal is to create value. In this step, the Virtual CFO focuses in implementing operational actions that drive growth and profitability before sale or pre and post-acquisition/merger as the case may be:

• Cost Synergies: Identifying areas where costs can be reduced, such as consolidating suppliers or eliminating redundant roles.
• Revenue Synergies: Leveraging the combined strengths of the merged companies to enter new markets or cross-sell products and services.
• Performance Monitoring: Continuously tracking financial performance to ensure that the business meets its post-merger goals.

3. Crafting a Roadmap: Once due diligence and the operational optimisation are complete, the next step is strategic planning. This is where the Virtual CFO’s expertise in mergers, acquisitions and businesses sales shines.

• Valuation and Pricing: Virtual CFOs help in determining the accurate valuation of a business, ensuring that the price is fair and reflective of its true worth.
• Negotiation Support: With their deep understanding of the value drivers, the current state and the potential future state, Virtual CFOs provide valuable insights during negotiations, helping SMEs secure the best deal possible.

READ: 10 Essential Steps Towards Selling Your Business

4. Ensuring a Smooth Transition: If you’re merging or acquiring a business, the post-deal is another important moment where a virtual CFO plays a critical role. That’s because integration is often where deals falter. However, a Virtual CFO can prevent this by ensuring a seamless transition.

• Financial Integration: Virtual CFOs oversee the consolidation of financial systems, ensuring that the new entity operates smoothly from Day 1.
• Cultural Alignment: Merging two businesses is not just about numbers; it’s also about people. Virtual CFOs work closely with HR teams to align corporate cultures, which is crucial for long-term success.

When it comes to buying and selling a business, small business owners cannot afford to navigate these waters alone. A Virtual CFO serves as a strategic partner during these moments. They guide SMEs through the complexities, ensuring value creation, and ultimately setting the stage for long-term success. For more insights into how our vCFO services can strengthen your business reach out to us on 1300 656 141. We will be happy to support you in such a unique moment.

For more insights into how BridgePoint Group’s Virtual CFO service can strengthen your business during mergers and acquisitions, reach out to us on 1300 656 141. We will be happy to support you in such a unique moment of your business.