If you think you might be ready to sell your business in the next two years, take advantage of this year’s end to clean up your Profit and Loss Statement. You can significantly increase the value of your business if you don’t have to explain non-business expenses and cash sales.
Think not in terms of the 25% you will save in taxes due to the lower net operating profit, but rather that every additional dollar you can show in profit will be worth times two or three that amount. Save 25% or earn 200% to 300% on the increased profit – not much to think about, is there?
Non-business expenses buried in cost of sales, or personal automotive mixed in with business expenses, typically cannot be added back to normalize earnings, because there is no way to know for sure which is non-business. It is advisable to reclassify these expenses as a distribution now, before year’s end.
To have one year of clean financials is good; having two years is better. Having two years is a particular focus from a bank’s perspective when a potential buyer applies for a loan.
As a seller or a buyer, if you would like a confidential conversation about how to prepare, please contact me on my cell, 954-579-4687, or by e-mail at bobd@dolansales.com. My LinkedIn profile is at http://www.linkedin.com/in/dolansales.
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