How important is financial forecasting to a business sale?
While a buyer will spend a significant amount of time evaluating the past performance of the target business, they are ultimately buying the future of that business. Future performance can certainly influence a buyer’s perception of value, so it is extremely important that a credible forecast is prepared and presented to potential buyers in any sale process.
Be mindful that any forecast assumptions will be scrutinised and evaluated against historic performance indicators. Understandably, the forecast for the year of the sale process will come under particularly strong review. Your performance against that forecast will be assessed monthly as negotiations and Due Diligence progress. It is particularly important during this phase of a process to be consistently achieving (or ideally exceeding) your forecasts, as this will only reinforce the buyer’s confidence in the acquisition opportunity.
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