Business Review

As brokers, we begin the process of selling the business to someone, we usually ask the seller to provide four specific issues: year-to-date financial statements at least three (3) returns taxation years, a list of furniture and accessories, and the lease agreement. All these items will provide one piece of the puzzle in assessing someone’s business and determine what the fair price for it should be. In this article I will focus on financial and taxation.

For most sellers, providing the last three (3) years tax returns, in addition to current financial data becomes a real difficult chore. On the other hand, as I mentioned in previous articles, buyers rely heavily on good practices, recent financial data to make a decision on the company. Yesterday is history! This is particularly true in an economy in recession, when significant decline in revenues and earnings results for the lower market value.

Now suppose that the seller provides the tax return and current financial data and we actually “price” of the company when we list. We need updated financial information at least every six months. The main reason is, of course, expertise. The value of your business may go up based on current financial data after redesign. So, we may be able to increase the price on the listing-the bad news is that if profits decline significantly, the seller may have to reduce prices to be competitive on the market.

The problem some of us deal with brokers is that once the seller provides the initial tax and financial data, obtain current financial as “Pulling Teeth”. The good news is that those who keep their ad “current” have a better chance of selling their business than those who do not. Help your broker and help you remember, yesterday is history, today is what counts!