A Company's Business Records Will Affect The Company's Value.

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April 09, 2010 by Robert Dean

It is important to have good Books & Records to run a successful business, but it's also very important to have good Books & Records to sell a business.

I have dealt with Business Owners with both immaculate Books & Records and owners with improper Books & Records. If your looking to acquire a business, which business would you rather buy? I think you know the answer. It is very difficult to properly value a business with poor books & records.

If you want to get optimum value for your business, make sure you have a solid grasp on your company's business financials. Make sure you have Profit & Loss Statements and Tax Returns and for 3 years, a Balance Sheet, a General Ledger and Bank Statements. You will also need this to qualify for SBA business acquisition financing.

  1. If you don't have a Profit &

    Loss, this is where I would start. This will show a buyer exactly how your

    company operates. Break it down into Gross Revenue, Cost of Goods Sold,

    Gross Profit, Company Expenses, and Net Profit.

  2. The Balance Sheet is a snapshot of

    your business at this exact period of time. This will show a buyer where

    he is at that time, and what he will need to do next. This will greatly help if

    the business deals with a lot of inventory.

  3. Tax Returns will help corroborate

    gross revenue, but your Tax Returns do not necessarily state the exact

    Discretionary Earnings for the owner. Everyone has their legal deductions

    for their business, and it does affect their taxes, but will not affect your

    company's value.

  4. You're General Ledger and Bank

    Statements should corroborate your gross earnings and match up with

    your Profit and Loss Statements. This is one of the primary elements of Buyer Due Diligence on your company

As a BizEx Business Broker, I analyze the financials to determine the Discretionary Earnings of the business owner. The more confident the buyer is in the financials of the company, the more likely they are to purchase the business. This improved buyer activity will ultimately result in increasing the company's overall value.

So if you are thinking of selling your business, make sure that the financials are in order to help make the sales transaction a smooth one.

How to Sell

Broker Information

Robert Dean

4551 Glencoe Ave., suite 210
Marina Del Rey, CA 90292
Office: (310) 882-2200 ext 122
Direct: (310) 793-6757
Lic#: 01720308

Logos Member of the California Association of Business Brokers Member of the International Business Brokers Association Member of the M&A Source Holder of the Merger & Acquisition Master Intermediary designation, M&A Source's highest qualification Holder of the Certified Business Intermediary designation, IBBA's highest qualification Holder of the Certified M&A Professional designation from Coles College Trained by the National Association of Certified Valuators and Analysts to conduct business valuations