How can you quantify the impact of high-quality startup consulting on business results? My company, Kruze Consulting, identified one method – startups with high-quality CPA consulting are twice as likely to be acquired as the average startup.

One of the most important outcomes startup founders and their venture capitalists want is to sell their startups and achieve an “exit.” Founders turn to boutique consulting firms to provide them with the advice, systems and metrics they need to manage their growing businesses. But one big advantage that the best accounting firms provide is critical advice when it’s time to sell the startup. And our data shows that founders benefit from this CPA advice!

Carta, the largest startup capitalization software provider, regularly publishes actionable analysis designed to help startup founders and VCs. Recently, they published data on the results of 3,067 startups incorporated in 2018. Only 161 of these were eventually acquired: 5.2%. Kruze Consulting provides accounting and CFO services to more than 800 venture-funded US startups, and when comparing their clients formed in 2018, Kruze found that more than 11% were acquired.

So what is driving that difference?

We think it’s at least partially due to our high-quality bookkeeping!

Auditors provide critical advice on exit

When a small company is acquired by a larger public company, as many of our clients have done (Apple, JP Morgan Chase, Cisco, etc.), the due diligence is intense. Major acquirers have teams dedicated to M&A, including accounting, tax and financial due diligence groups. Getting through this difficult due diligence process is not easy, and having organized financial statements, tax returns and financial metrics is just the first step. For business owners, having CPAs as advisors, who know the business and can get on the phone to answer technical questions is not only invaluable, but also a great stress reliever in a very challenging moment.

Outsourced accountants keep companies ready

We have also found that many offers for start-up acquisitions appear suddenly. Partnership discussions turn into acquisition discussions; the listed company’s biggest competitor makes an acquisition and they have to respond. If the startup didn’t use a high-quality accounting firm, the time it takes to retroactively catch up on due diligence materials can derail and trade. For the buyer, buying a startup that has all of these up-to-date, organized and ready for diligence instills confidence in the deal.

Solid accounting metrics make companies more successful

Of course, it’s not just about getting a deal done. Startups with solid, reliable, constantly updated statistics can make better decisions across the board – whether it’s hiring, new products, new markets, etc. I believe (and have seen) that founders with the ability to make informed decisions quickly to compete in the market and survive the competition. Sound accounting means that companies are run better, from a clearer understanding of how cash flow should be managed, strategies for growth and hiring the right people at the right time.

Most acquisitions occur when a company is small enough to still use an outsourced accounting provider

Most startup acquisitions happen before Series B funding – according to Carta, 93% of companies in the sample set that were acquired were envisioned through Series A startups. In the early stages, many startups do not prioritize the accounting business – favoring product and growth over the business side. For early-stage founders, this oversight often feels correct. After all, founders are often thin, wear many hats, and their startups must grow to survive and raise future capital. But failing to allocate the right time and resources to the accounting stack can detract from all the hard work of chasing growth and developing solid products. This is where outsourced accounting partners really benefit startups, that they are there to take the work off their plate and let them stay focused on growing their business.

The critical role of auditors in the success of clients

As trusted advisors to startup founders, we as accountants play a critical role in guiding our clients through some of their most stressful moments – the challenges of growth and the complexities of the acquisition process. Our data shows quite definitively that startups operating with access to high-quality accountants achieve better results.

This is a legacy accountants can be proud of, and is a strong reason for us to have chosen this great profession.

It is a mistake to assume that founders only rely on accountants for compliance. In reality, founders look to us for strategic guidance, data-driven insights and expert advice on navigating the financial aspects of running a business. By providing accurate, timely financial information and proactive recommendations, we enable our startup clients to make informed decisions that position them for success.

Our value as accountants shines brightest during the high-stakes moments that business founders face. As our clients’ trusted advisors, we play an important role in ensuring their businesses are ready for due diligence, with clean finances and well-organized records – whenever they are needed. Our deep understanding of their business and ability to provide prompt, knowledgeable responses to due diligence inquiries can be the difference between a smooth transaction and a derailed deal. And for those of us who have advised on many corporate exits, the firm hand of experience is a value our clients will never forget.

Sometimes the work we do can feel routine or mundane, because let’s be honest, it can be sometimes. But we shouldn’t forget the profound impact we have on our customers’ lives in their most stressful moments. Our expertise, guidance and unwavering support are the foundations upon which founders build their dreams.

As accountants, we are more than just number crunchers. We are essential partners who provide stability and guidance to our clients as they navigate the most complex business challenges they will ever face. Our work, although sometimes boring, is a testament to our commitment and the critical role we play in shaping the future of business.

So, to my fellow accountants, be proud of the value you bring to your clients! Embrace the challenges and opportunities that come with being a trusted advisor. Remember that your impact extends far beyond the numbers on a spreadsheet. You are the backbone of the startup ecosystem, and your contributions are critical to the success of the companies you serve.