Inadvisable To Cull Client List Before Selling Business

Although some say it is a good idea to clean up your client list prior to listing your business for sale, a wholesale cleanup is likely to raise red flags for potential purchasers, says Toronto forensic accountant and chartered business valuator Patricia Harris.

"You shouldn't just say, 'OK, I've decided to sell my business so I'm going to look at the client list and then cut some,' because if you're forecasting revenue and you've got a forecast decrease you'd better have a good explanation as to why you've lost or cut particular clients," Harris, partner at Fuller Landau LLP, tells Succession Planning, a special supplement published by The Bottom Line and Lawyers Weekly.

Harris notes that if a client is not paying, the owner of a business should be addressing that well in advance of a sale, and weeding them out along the way.