Most founders want to know where their firm stands before they talk to a single buyer. That's the right instinct.
Once you start approaching buyers, word travels. Your team may hear. Clients may hear. And the first impression a buyer forms is hard to change. It's far better to find the weak spots yourself, quietly, while there's still time to fix them.
The question is who to ask. Several kinds of adviser can help, and each one answers a different question.
Your accountant
The question they answer: Are my numbers right?
Your accountant can show what the firm really earns once your own pay and personal costs are separated out, and can get your financial records into the shape a buyer expects. That matters, because messy numbers create doubt in due diligence.
What accountants usually don't assess is how much of those earnings depends on you personally.
A valuation professional
The question they answer: What is my firm worth today?
A formal valuation gives you a number, based on your financials and the market. It's useful, especially if you're planning a sale or a buy-out.
But a valuation is a snapshot. It tells you what the firm is worth now. It doesn't usually tell you what is holding that value down, or what to change to raise it.
A law firm broker
The question they answer: Who would buy my firm, and on what terms?
A good broker knows the buyers, knows what deals look like, and can run a sale. Many will also tell you honestly whether your firm is ready to go to market.
A broker's main job is the transaction itself. They come into their own when you're ready to sell, or close to it.
An exit strategist
The question they answer: What would a buyer see in my firm, and what should I change first?
This is the work I do. I look at your firm the way a buyer would, years before any sale: how dependent it is on you, how secure its revenue is, and whether your clients would stay. Then I set the order in which to fix it.
I don't sell firms, value them formally or do your accounts. Those jobs belong to the advisers above, and the best results come when everyone does their own part.
Your own team
Your partners and senior people know the firm better than anyone. But they're also part of what's being assessed, and they may have a stake in the outcome. Their views matter. They just can't give you an outside view.
Questions to ask any adviser
Whoever you talk to, these questions help:
- Do you earn more if I sell sooner? That isn't a reason to avoid them. It's just worth knowing.
- Will you look at how much the firm depends on me, or only at the numbers?
- Will you tell me what's wrong, not just what the firm is worth?
- How will you keep this confidential from my team and my clients?
The right time to ask
The best time to assess your firm is about three years before you want to sell. That leaves time to fix what you find, and time for a buyer to see that the fixes have held.
Ask in the year you decide to sell, and you'll mostly find out what you can no longer change.
Where to start
You can start on your own, privately. The Exit Readiness Diagnostic takes four minutes. Nobody in your firm needs to know you've taken it, and it shows where your firm's value still depends on you.
Find out where your firm stands.
Twelve questions, four minutes.
