Business Surgery: Chris Kelly, of Jacobs Allen, explains why corporate finance is important even for smaller firms

The day after I passed my accountancy exams, my boss congratulated me and said: “Welcome to the first day of really learning to be an accountant.” I was deflated but he was right.

The chartered accountancy exams provided an excellent technical foundation, and the ability to deal with routine accountancy and tax work competently and ethically. However, the exams didn’t cover areas that actually are of most interest to clients – such as corporate finance (the buying, selling, and financing of businesses), or business strategy.

For the 10,000 or so larger UK businesses, excellent corporate finance advice is available from specialist departments in larger accounting firms and corporate finance boutiques. This world has developed its own mystique and uses terminology such as EBITDA, VIMBO, Deferred Consideration and Earn-Outs. These terms don’t necessarily resonate with the average small business owner.

Why do the other five million UK businesses, with profits below £500,000 a year, find accessing reliable and cost effective corporate finance advice much more challenging?

Part of the reason is that until 15 years ago corporate finance training for advisers working in the smaller business sector was very difficult to source. Even today there is still a preference for most accountants to focus on the compliance work they are more familiar with. Consequently, many businesses are not sold on retirement, acquisitions are not made and opportunities for growth are not taken. This is an area we specialise in.

The theoretical elements of corporate finance work can be absorbed relatively quickly with the right training. However, the experience required to lead corporate finance work takes years to develop. It is a fluid process that often involves dealing with people’s emotions.

Accessing specialist corporate finance advice can be crucial in the following common scenarios:

• Some business owners build up a great business and wait to receive an unsolicited offer to buy it. Their first thought is often to follow up on that single offer, rather than to consider that others may also be interested too. The best deal is achieved as part of a competitive marketing process.
• Other business owners assume no one will be interested in buying their business and look to wind it up in retirement rather than sell it as a going concern. They potentially miss out on a substantial boost to their retirement funds.
• Many business owners have little idea how much their business could realistically be worth or when is a good time to sell.

Selling your business is usually the biggest sale a business owner will make and is definitely worth obtaining specialist advice and thoroughly exploring the options for achieving this. Feel free to call me if you would like to know more – 01284 704260.

Chris Kelly is a director, Jacobs Allen Chartered Accountants