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Wayne Scott of New Life CFO talks about that not-so-obvious action that is an important value builder for your company.

What does your banker think about your company’s financials? What do you think about your company’s financials? How could this information impact wealth creation at your company?

Bacon, Eggs, and Biscuits

Today, I had breakfast with a banker here in Dallas at Pete’s Café. It’s one of those dying-breed breakfast joints where you can walk out stuffed for five dollars. And yes, the biscuits were awesome. As we talked, he asked an unexpected question, “When you talk with Owners and CEOs of small businesses, how solid are their financial numbers?” As I looked at the friendly smirk on his face, I realized that he already had an answer.

He got me wondering…

Do business owners or even company controllers know the answer to this question? Even more important, do they know that their dialed-in-response has a significant impact on the value of their company?

The Power of Revenues and Profits

Certainly, the ability to generate revenues and consequently profits for your company is a significant value builder. However, that capability is not enough on its own. Whether you need a bank loan, want to increase your working capital, or plan to sell your company, the quality of your business’s financials has a measurable impact on what bankers believe about your numbers.

Real and Reliable Numbers

One way to add value to your business without selling another dollar of goods or services is to have an annual audit. Bankers love to know that what they are looking at is real and reliable. Here are a few additional reasons to consider an audit:

  1. Build confidence in your management team: When everyone in your company knows that CPAs review the books, it automatically gives the team a sense of confidence that all is well and you are who you say you are.
  2. Perform due diligence before due diligence: Due diligence is defined as the reasonable steps taken by a person to satisfy a legal requirement, especially in buying or selling something. Due diligence is also a comprehensive appraisal of a business performed by a prospective buyer, especially to establish its assets and liabilities and evaluate its commercial potential. So ponder the idea that having an audit is both a reasonable step and precursor to a comprehensive appraisal of your business.
  3. Be a well-oiled machine: Think about it, when you can hand over your financials and they have that “stamp of approval” from an independent source, it tells more than that the numbers are OK; it tells interested parties that your company is well-managed, well-capitalized and well on its way to big things.

Value Building Potential

Does anyone need a definition of value building for his or her business? Most owners know what it is when they see it, but it is a whole other game to know how to build it. I talked about one method above.

Beyond this, there are additional value-builder actions you can take to improve your ability to sell your company, or just have peace of mind, knowing you’re building a valuable asset for the future.

Value Builder Focus (This is one of an eight-part series on helping business owners identify wealth value builder actions in their company.) Check back soon to read the next blog in this series.

Want to know more about Value Building?

TAKE the FREE Value Builder survey and see exactly where your company value is strongest and where you can make further improvements. It only takes 13 minutes and you’ll get INSTANT feedback.

Contact me at [email protected].

Hey, I’m headed back to Pete’s Café soon for some more biscuits. Maybe I’ll see you there.

New Life CFO Services include the following:

  • Historical Financial Diagnostics
  • Budgeting and Forecasting
  • Cash Flow Monitoring and Future Projecting
  • Owner and CEO Financial Statement Coaching
  • Financial Monitoring and Advice
  • Annual Planning
  • Strategic Plans and Financial Modeling
  • Fractional CFO Services
  • Value Builder Services