Seller Accountant assists with plenty of e-commerce business deals, from optimizing investor-grade books to helping sellers value their business for sale. But just as we’ve seen sellers pull off great deals, we’ve also seen deals fall apart, and these are the five most common seller behaviors that can kill a sale.
It may be tempting to hide your biggest disappointments from a potential buyer – after all, you want to put your best foot forward for a sale, right?
Actually, when dealing with investors and buyers, it’s most important to create a total picture of your business, both the good and the bad. Being upfront about your missteps builds trust with your buyers, and since your financials will reveal anything you’ve tried to sweep under the rug, it’s best to keep things out in the open from the jump.
Black Hat Sales Tactics
You may have “played the game” to get your product launched in the beginning – skirting Amazon terms of service when it made sense to do so. But if you rely on these shady dealings to keep your business afloat, it may be a sign that your product isn’t capable of selling on its own merit.
Much like divulging any sales mistakes you may have made to your potential buyer, you should be upfront about how you’re marketing and selling your product. The larger an investor is, the more above-board they have to be with Amazon compliance.
There are two different ways your books can be “bad”: co-mingling and cash-basis.
Co-mingling your books means you’re running your business through the same accounts that you pay your mortgage and buy groceries; you’re not separating business from personal finance.
Cash-basis vs. accrual-basis accounting is something we’ve talked about on the blog. Cash-basis accounting doesn’t paint an accurate picture of your financials because it doesn’t take into account the complexities of shipping and receiving in e-commerce businesses. You can read more about why accrual accounting is necessary for investor-grade financials in this post.
Both of these options muddy up your accounting and make it unclear to buyers how much your business is really worth. (Need to get your accounting up to buyer standards? Book a free discovery call!)
Bad Inventory Tracking
Sellers who are getting ready to enter due diligence will want to know very specific information about their inventory: what pending deposits are you waiting on? Which products are stuck on a freight? How much do you owe in duties and tariffs on your most recent shipment?
The best way to have this information at hand is to have an obsessively detailed inventory tracking system. Whether that’s simple spreadsheets or a paid software program, we’ve seen higher-value deals go to clients who have their inventory tracking in order over those who try to guess at their product value during a sale.
No Tax Compliance
While you don’t need to file for sales tax in every state, you should definitely have a strategy for taking care of your sales tax, employee taxes in other states, and income tax, among others.
Buyers want to know that they’re not inheriting your tax compliance mistakes, so if you need to get your tax strategy together, Seller Accountant recommends TaxValet for sales tax and TaxJar for tax filing software.
Work With Us
If you’re prepping your business for a sale, Seller Accountant would love to help! Book a free 15-minute discovery call today.