Only negotiate when selling or buying a business.  This may seem an unusual heading to an article but it now keeps happening too many times and I feel compelled to write about it.

There is no question that selling a business is difficult as there are so many items to consider.  Equally, buying a business is extremely difficult not the least because the buyer may not know the seller but more importantly to the buyer, because they are yet to fully understand how the business works and what has made it successful.

When you put these basic unknowns together and add the imprecise art of valuing a business, both the seller and the buyer understand there will be a negotiation on the final purchase price of the business.  What is intriguing from my perspective is that sellers and buyers can spend a lot of time and negotiating energy to purely focus on the purchase price, which is important as the seller does not want to take less than they think the business is worth and the buyer does not want to pay any more.

However, there are two things missing in this equation.  First, the terms of the deal are probably more important than the final purchase price.  Just as the final purchase price is emotional for both the seller and the buyer so too are the terms and conditions.  These emotions can go both ways.  For example, the seller may be willing to work for free for 4 weeks after the buyer owns the business and not get paid.  That is, the seller does not mind giving their time and emotionally does not feel they are giving up too much.  If you put a dollar value on it, it could be worth $2,000 to $20,000 depending on the equivalent salary the buyer would pay.  Additionally, having the seller work for four weeks and train the buyer instead of one or two weeks could be tremendous value as the buyer gets to absorb more knowledge from the owner.  There are many other examples such as the seller carrying a note as part of the purchase price for a lower rate of interest than a third party lender, the seller being willing to come back and work for three weeks in 6 months time so the buyer can take time off with their family, the seller stepping in to help the business if a key employee becomes sick.

The trend I am currently seeing is for the seller and the buyer to over negotiate every detail in the transaction.  The buyer feels they are doing the seller a favor by buying their company and as a result, should get every demand they make quickly and easily.  Conversely, the seller thinks the business is worth more than the buyer is offering and now that the recession is healing, the buyer is going to do so much better and therefore the seller wants to be paid for some of the success they think the buyer is going to enjoy.  The position of the buyer and the seller is not unreasonable however, if it gets to the point where it kills the deal, which is what I am seeing happen, then it makes no sense.

Another factor that effects the above is that the seller and buyer need to come to terms on the purchase price and terms of the deal.  Separate to this negotiation however, the buyer has to deal with negotiating with the landlord, the lender and if it involves a franchise, the franchisor.  The buyer may even have to negotiate with family and friends to borrow money to finance the initial purchase of the deal.

The bottom line in all this is that it is critical to understand what the word negotiation means.  According to one dictionary it says “a discussion set up or intended to produce a settlement or agreement.”  The key words are ‘settlement or agreement’ that is, both sides have to give and take or there will be no settlement or agreement.  To be clear, once one party demands too much the other party will quickly move to the same position and then neither party will get what they want.  Probably the most important component a buyer wants when they buy an existing business is goodwill.  In most business sales, the goodwill has the highest value.  For the buyer to maximize the goodwill they expect to receive from the seller, there is a need for both parties to negotiate in good faith and respectfully.  This also applies when the buyer has to negotiate with the other parties in the transaction, especially the landlord.

A landlord is completely separate from the business.  If the seller of the business has paid their rent on time and been a good tenant, the landlord does not want to see them go.  In most cases, there is nothing in it if the landlord approves or refuses to approve the buyer to take over the lease, that is, the landlord really does not care if the seller and buyer have agreed on the price and terms of the sale as it’s the landlords job to look after the landlords interests.  If they do not like the buyer they will not hesitate to deny the buyer a lease.

Negotiations can be tough.  Its fine to make negotiations tough.  If it gets to the point where the negotiations are no longer “a discussion set up or intended to produce a settlement or agreement” then neither the seller or buyer will end up with what they want.  Animal instincts such as the need to win, be right or pay a fair price can derail a successful business transaction.  Understand your personality and the strengths and weaknesses you bring to a negotiation and just as importantly, understand what is important to the other party.  The chances of success have just then improved.

If you are thinking about selling your business and would like to know its value, please email me at Andrew@RogersonBusinessServices.com and I can put together a Brokers Opinion of Value for you.  If you would like to see a sample document, click the following link:  http://www.rogersonbusinessservices.com/services/selling-a-business

Related articles

• Negotiating for Wimps (inc.com)

There is a US Court of Appeals judge by the name of Judge Learned Hand and he lived from 1872 to 1961 or until he was almost 90 years old. Originally from upstate New York, Hand graduated from Harvard Law School and became a lawyer. At 37 years of age he became a judge appointed to the Federal District of Manhattan and he became well known and respected for the quality of his judgments.

What caught my attention was one of the best quotes I’ve read regarding the paying of taxes. His quote is “…over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do it right, for nobody owes any public duty to pay more than the law demands.”

It looks like the campaigning for the 2012 Presidential elections has now started – some 16 months before votes can be cast. Perhaps it’s time to cancel your newspaper subscriptions and access to cable TV as the media are going to “entertain and inform” us with every happening. Wouldn’t it be nice to disappear for 16 months and come back on the day prior to the election and miss all this “noise?”

Regardless of your feelings about the above, what it is not time to do is ignore putting a business financial plan together. If you own and operate a business, just as it is important to have a personal financial plan, it is just as important to have a business financial plan not only for your benefit but also for those that work in the business.

Just as putting together a personal financial plan takes time, so too does a business financial plan. The place to start is by finding a qualified financial or wealth consultant to understand your business and the components you will use in your plan. The components you could consider using include:

• Medical, dental and vision health insurance – group or individual
• Supplemental health insurance
• Life insurance – group, keyman and individual
• Long term care insurance – group or individual
• Buy/Sell Agreements – with insurance funding
• Executive and employee fringe benefits
• Disability income insurance – group and individual
• Retirement planning – qualified and non-qualified

Other components to consider include debt management, property and casualty insurance and investment strategies.

Minimizing tax is good business. Minimizing tax and putting that money to work for the long-term is better business. The place to start is with a good business financial plan. What’s holding you back from getting starting?

On Monday, September 27, 2010 the President will sign into law HR 5297, the small business bill.  This bill has huge ramifications on commercial lending AND the economy.  Most people don’t realize how big this bill is and the ramifications of it on small business lending.

The key SBA provisions of HR 5297 are noted below:

7A SBA loans

• Increase to maximum SBA 7a loan amount to $5,000,000 (permanently)
• 90% guarantee through December 31, 2010
• Fee waiver for the rest of 2010 (subject to available funding)
  

504 SBA loans

• 504 Debenture increase to $5,000,000 for most applications and $5 ,500,000 for manufacturers (permanently)
• Two year window for refinancing debt (details provided below)
• Two year extension of the First Mortgage Pool (FMP) program from the date of the first pool issuance – first pool issuance expected to be September, 2010
• Fee waiver for the rest of 2010 (subject to available funding)

504 Refinance Provision

Here is a summary of the provision:

• Property must be owner occupied (51% or greater)
• Debt must be at least two years old
• Borrower in operation for the entire two year period
• Proceeds of which must have been used for 504 eligible fixed assets for the benefit of a small business concern
• Payments must be current for at least one year prior to application
• Maximum Loan To Value on the existing property is 90%
• With additional collateral, the maximum LTV on the existing property is 125%
• Federally guaranteed debt is not eligible for refinancing (7A, 504, USDA)
• Two year window

It is important to note:

• Not every bank will participate in these changes.
• In addition, it could be MONTHS BEFORE THE CHANGES IN LOAN AMOUNT AND THE REFINANCING PROVISIONS ACTUALLY KICK IN. The bill is vague in its timelines.  Basically, Congress has passed it, now the lenders and the SBA need to execute it and that can take a month or two or three.

If you are thinking of becoming a business owner, you have three choices. Those choices are to start a business from scratch, buy an existing business or buy the rights to a local franchise. Each option appeals to a different type of entrepreneur. If you more information, you can go to www.businesstransactionbooks.com where you can buy and immediately download a copy of a book on each option and decide what makes the most sense to you.

The following article is reprinted with the permission of Monty Walker at Walker Business Advisory Services, Wichita Falls, TX. Phone: 940-322-5086.

The Patient Protection and Affordable Care Act (the Patient Protection Act) was signed into law by President Obama on March 23, 2010. The Reconciliation Act has now passed the Senate and the House and will be signed into law by President Obama sometime during the week of March 28, 2010. Not withstanding the fact that amendments to the Act will likely occur, some minor and some significant, it is important for small business owners to understand the tax components of the Act which apply to them as it currently stands. All small businesses will be impacted with the following information hopefully of assistance to those businesses in the local Sacramento area.

For owners of small businesses and their workers, the recently enacted health reform legislation has some key provisions to pay attention to. The major ones include: tax credits; excise taxes; and penalties. But whether a business will be affected by them depends on a variety of factors, such as the number of employees the business has. This article provides an overview of the key tax provisions in the new law with the biggest impact on small business.
Tax credits to certain small employers that provide insurance. The new law provides small employers with a tax credit (i.e., a dollar-for-dollar reduction in tax) for nonelective contributions to purchase health insurance for their employees. The credit can offset an employer’s regular tax or its alternative minimum tax (AMT) liability.

Small business employers eligible for the credit. To qualify, a business must offer health insurance to its employees as part of their compensation and contribute at least half the total premium cost. The business must have no more than 25 full-time equivalent employees (“FTEs”), and the employees must have annual full-time equivalent wages that average no more than $50,000. However, the full amount of the credit is available only to an employer with 10 or fewer FTEs and whose employees have average annual full-time equivalent wages from the employer of less than $25,000.

Years the credit is available. The credit is initially available for any tax year beginning in 2010, 2011, 2012, or 2013. Qualifying health insurance for claiming the credit for this first phase of the credit is health insurance coverage purchased from an insurance company licensed under state law. For tax years beginning after 2013, the credit is only available to an eligible small employer that purchases health insurance coverage for its employees through a state exchange and is only available for two years. The maximum two-year coverage period does not take into account any tax years beginning in years before 2014. Thus, an eligible small employer could potentially qualify for this credit for six tax years, four years under the first phase and two years under the second phase.

Calculating the amount of the credit. For tax years beginning in 2010, 2011, 2012, or 2013, the credit is generally 35% (50% for tax years beginning after 2013) of the employer’s nonelective contributions toward the employees’ health insurance premiums. The credit phases out as firm-size and average wages increase. Tax-exempt small businesses meeting these requirements are eligible for payroll tax credits of up to 25% for tax years beginning in 2010, 2011, 2012, or 2013 (35% in tax years beginning after 2013) of the employer’s nonelective contributions toward the employees’ health insurance premiums.

Special rules. The employer is entitled to an ordinary and necessary business expense deduction equal to the amount of the employer contribution minus the dollar amount of the credit. For example, if an eligible small employer pays 100% of the cost of its employees’ health insurance coverage and the amount of the tax credit is 50% of that cost (i.e., in tax years beginning after 2013), the employer can claim a deduction for the other 50% of the premium cost.

Self-employed individuals, including partners and sole proprietors, two percent shareholders of an S corporation, and five percent owners of the employer are not treated as employees for purposes of this credit. Any employee with respect to a self-employed individual is not an employee of the employer for purposes of this credit if the employee is not performing services in the trade or business of the employer. Thus, the credit is not available for a domestic employee of a sole proprietor of a business. There is also a special rule to prevent sole proprietorships from receiving the credit for the owner and their family members. Thus, no credit is available for any contribution to the purchase of health insurance for these individuals and the individual is not taken into account in determining the number of full-time equivalent employees or average full-time equivalent wages.

Most small businesses exempted from penalties for not offering coverage to their employees. Although the new law imposes penalties on certain businesses for not providing coverage to their employees (so-called “pay or play”), most small businesses won’t have to worry about this provision because employers with fewer than 50 employees aren’t subject to the “pay or play” penalty. For businesses with at least 50 employees, the possible penalties vary depending on whether or not the employer offers health insurance to its employees. If it does not offer coverage and it has at least one full-time employee who receives a premium tax credit, the business will be assessed a fee of $2,000 per full-time employee, excluding the first 30 employees from the assessment. So, for example, an employer with 51 employees who doesn’t offer health insurance to his employees will be subject to a penalty of $42,000 ($2,000 multiplied by 21). Employers with at least 50 employees that offer coverage but have at least one full-time employee receiving a premium tax credit will pay $3,000 for each employee receiving a premium credit (capped at the amount of the penalty that the employer would have been assessed for a failure to provide coverage, or $2,000 multiplied by the number of its full-time employees in excess of 30). These provisions take effect Jan. 1, 2014.

The “Cadillac tax” on high-cost health plans. The new law places an excise tax on high-cost employer-sponsored health coverage (often referred to as “Cadillac” health plans). This is a 40% excise tax on insurance companies, based on premiums that exceed certain amounts. The tax is not on employers themselves unless they are self-funded (this typically occurs at larger firms). However, it is expected that employers and workers will ultimately bear this tax in the form of higher premiums passed on by insurers.

Here are the specifics: The new tax, which applies for tax years beginning after Dec. 31, 2017, places a 40% nondeductible excise tax on insurance companies and plan administrators for any health coverage plan to the extent that the annual premium exceeds $10,200 for single coverage and $27,500 for family coverage. An additional threshold amount of $1,650 for single coverage and $3,450 for family coverage will apply for retired individuals age 55 and older and for plans that cover employees engaged in high risk professions. The tax will apply to self-insured plans and plans sold in the group market, but not to plans sold in the individual market (except for coverage eligible for the deduction for self-employed individuals). Stand-alone dental and vision plans will be disregarded in applying the tax. The dollar amount thresholds will be automatically increased if the inflation rate for group medical premiums between 2010 and 2018 is higher than the Congressional Budget Office (CBO) estimates in 2010. Employers with age and gender demographics that result in higher premiums could value the coverage provided to employees using the rates that would apply using a national risk pool. The excise tax will be levied at the insurer level. Employers will be required to aggregate the coverage subject to the limit and issue information returns for insurers indicating the amount subject to the excise tax.

Continue monitoring regulatory changes. Debate over health care reform, and in particular the recent Act, will continue. Be sure to monitor ongoing health care issues as it is very probable that the new law will eventually be amended in significant ways.

If you need additional information, have questions, or need assistance navigating the sea of business confusion, call your Business Transaction Strategist, Monty W. Walker at (940) 322-5086.

When most business owners decide to sell and they wish to be the one to start the process, the first and obvious place to start is with a business valuation. A business valuation gives the owner a reference point as to whether the price they hope to get for the business will be reasonable and/or achievable.

Some business owners choose the selling price for the business based on what they want in order to sell. They may have a certain amount of debt they wish to retire, money they need for retirement plus an ache that makes them think there business is worth a certain amount of money. Not a good basis for trying to convince a buyer about the asking price for the business.

Other valuation techniques include the “rumor” method. The “rumor” method is the price an owner chooses to use based on what he heard his friend sell his business. Rather than a friend, it could have been a competitor two counties over or something they read in the local paper. Once again, not a good method to use to convince a buyer on the asking price for the business.

Business valuations can be simple and straightforward or technical and complicated. If the business is 100% owned by one person, has been in the same location with roughly the same number of employees for the last three years and the business has been operated the same way, then a valuation would be fairly easy to do if all financial records such as profit and loss, tax returns and balance sheets are up to date.

The above can be complicated if the business only has one or two customers. If your business has existed for 54 years but has been supplying nuts and bolts you manufacture to General Motors and they are your only customer, how willing do you think a new buyer would be to take over the business?

Consider another example. If the business is 40% owned by a father that retired 6 months ago and now his son wishes to sell his 40% interest with the remaining 20% owned by a long term employee that is also going to retire in 12 months, how easy do you think it would be to value this business?

The bottom line is that the permutations are endless. But as we suggested at the start of this article, getting a business valuation is the right starting point. Inevitably the market will determine the final price paid. But don’t forget, the price is only the start of the journey; it’s the final terms of the offer that determine the value offered for the business. Price and value are not synonymous. The business may have a price of $1,000,000 but the value could be a totally different figure. You’ve heard the expression – Beauty is in the eye of the beholder. Value is from the same family, that is, value is in the eye of the Beholder.

Be aware there are different types of business valuations designed to meet different purposes. A business valuation that may go before a court of law is much more sophisticated and analytical than a business valuation that gives an opinion of value to the owner of a business that’s thinking of selling. That is, to meet legal standards, the valuation needs to be USPAP compliant.

A service I provide my clients that are considering selling their business is a Brokers Opinion of Value. I also do Certified Machinery and Equipment Appraisals. Because they meet different requirements for different reasons the final reports are completely different and therefore have different costs. Know what you want from your business valuation and understand the final cost will vary according to the sophistication of the report.

The following is an article by Chrystal Jarvis of the Birmingham Business Journal about good news for Small Businesses looking for positive news about finance for their business.

The U.S. Small Business Administration is looking to offer more government-backed loans to commercial businesses.

The government agency has proposed increasing the size standards for 71 different types of businesses, two-thirds of them in retail trade sectors. The rest are in accommodations and food services and other services.

If adopted, more small businesses will become eligible for government loans and will have access to the SBA’s financial assistance, contracting and other programs.

“SBA has undertaken a comprehensive review of our size standards to ensure they are current and reflect changes in the economy and the marketplace,” SBA administrator Karen Mills said. “SBA’s lending and government contracting programs provide effective opportunities for small businesses to help them expand and create jobs, especially during these tough economic times. This review and proposed changes will help make these critical programs available to more small businesses and ensure SBA is in a position to be a real partner in helping our nation’s entrepreneurs and small business owners succeed.”

The typical business owner will only sell a business once. Understanding the complex process involved will help produce the best results. But don’t fall prey to the myths that can derail or seriously affect a potential sale.

Myth 1 – I Can Sell It Myself

Many owners believe they’re qualified to sell their business without professional assistance. Many owners are entrepreneurs and the key salesperson for the company. But selling a business is not like selling a product or service.

If you’re looking to sell on your own, confidentiality is lost. If word of a potential sale gets out, there are definite risks of losing clients, employees and favorable credit terms.

Do you really have the time to run your business and compile marketing materials, advertise, screen buyers, give tours and facilitate due diligence?

When you’re looking to sell you want to put even greater emphasis on running your business, boosting your sales and not taking on new challenges.

Myth 2 – I’ll Sell When I’m Ready

Certainly, an owner wants to be sure he or she is mentally and emotionally prepared to sell. But personal readiness is just one factor. Economic factors can have a significant impact on the sale of a business.

Sale prices can be affected by industry consolidation, interest rates, unemployment and many other economic measures. Talk with a professional and aim to sell when your personal goals and market conditions align.

Myth 3 – I Know What it is Worth

Some owners will base the company value on what they need for retirement. Others will tell you they want $100,000/year for “sweat equity.” Still others utilize industry multiples.

A third party valuation is a good idea for anyone seriously considering the sale of their business. An outside valuation will include a thorough analysis of the business and the market it operates in. This will provide a solid understanding of the company’s growth potential, not some vague industry average.

Myth 4 – It’s Like Selling a House

Preparing to sell your house may take a few weeks, then you want to get the word out to everyone that the house is on the market. Once you get a satisfactory offer, you sign on the dotted line, turn over the keys and move on.

Selling a company is much more complex. A successful business sale usually requires a great deal of pre-planning, at least a year and maybe as long as three years to drive sales, develop key staff, document the operations and control expenses.

The average house will sell in less than four months, while the average business sale is nine months to a year.

Even after the business is sold, the seller can be expected to put in at least a few months, and possibly years of transition time, helping to make the new owner a success.

Sound sale strategies will bring you the optimum price the market will bear. Go to market with realistic expectations by getting a professional valuation and using a professional business broker or intermediary.

If you have a question about selling or buying your business, give Andrew a call today at (916) 570 2674.

This article is reprinted as a courtesy of the International Business Brokers Association^® (IBBA.) IBBA is the largest international, non-profit association operating exclusively for the benefit of people and firms engaged in the various aspects of a business brokerage and mergers and acquisitions. IBBA^® has 1,950 members worldwide, with corporate headquarters in Chicago, Illinois.

Are you thinking of selling a business or buying a business in these tough times? With negative economic news grabbing the headlines in the United States, business owners may think it’s not a good time to sell their business. But fortunately for owners looking to sell, that’s not necessarily true.

Business sales are still taking place with sellers capturing attractive prices and favorable terms, when the deal is structured properly.

Look at the buyer’s credibility
Of course, you want to find the best buyer possible. Whether it’s an individual, another company or a Private Equity Group, look for a potential buyer with business acumen, significant assets to pledge as collateral or a committed fund, as well as demonstrated success.

With a proven, credible buyer at the negotiating table, lenders are more likely to support the transaction.

Expect some seller financing
Oftentimes during a tight economy sellers must share the risks with the buyer and the lender in order to achieve the highest value.

In many instances the value of a successful business is greater than the fixed assets. In today’s tight lending environment, a seller can still get a strong value for the business, but the seller may need to finance more of the purchase price than before. Regardless of the capital structure or finance considerations, professionally crafted and creative deal structure is the key during a difficult economy.

Typically, seller financing has been somewhere between five percent and 15 percent. With the current lending climate, seller financing may approach 15 percent to 25 percent amortized over 10 years with a balloon payment between three years and five years.

After the buyer has proven themselves in the business and shown that the debt payments will be made, the lender will generally refinance the seller’s note. As a result, the seller receives full payment within three years to five years and the lender gets to loan more funds to a demonstrated lower-risk borrower.

While the economy has put a crunch on available financing, it has not had a dramatic impact on the number of potential buyers. With the right structure, deals are still getting done across the U.S.

If you have a question about selling or buying your business, give Andrew a call today at (916) 570 2674.

This article is reprinted as a courtesy of the International Business Brokers Association^® (IBBA.) IBBA is the largest international, non-profit association operating exclusively for the benefit of people and firms engaged in the various aspects of a business brokerage and mergers and acquisitions. IBBA^® has 1,950 members worldwide, with corporate headquarters in Chicago, Illinois.

The question of whether to sell your business is a difficult one. It is, no doubt, the biggest financial transaction you’ll ever make. Yet every successful business owner must face it eventually.

There are several things to consider when selling your business:

• When is the right time to sell?
  It’s important to pay attention to what’s going on within your company and industry. For a successful sale, you and your business must be ready. Your business should be properly managed and you should be able to demonstrate your company’s financial capability. If you want to sell your business by a certain date, allow sufficient time as selling a business is a complicated process that takes time.

• Potential buyers.
  This may include competition, customers, vendors, suppliers, long-term employees or perhaps you have family members who wish to take over the business. Most often it is someone from outside of your circle of influence. A good intermediary can perform a proper search and will assist you in determining who may be the best acquirer.
• Maintain records.
  You want all of your hard work to pay off in the sale, so be sure you have current, detailed records that provide an auditable assessment of the company’s financial position, and future projections.
• Determine your business’ value.
  A business’ value is determined by a compilation of factors such as the company’s sales, earnings, performance, market outlook, personnel, net book value and fair market replacement value of equivalent operating assets. But it can also be influenced by intangible assets like the company’s image, reputation and goodwill.

• Seek professional help.
  Regardless of your background, you should still seek professional advice. There will be many financial, legal and tax issues that will need to be resolved before you can sell your business. This will allow you to continue working on normal day to day business operations to keep your business moving forward.

IBBA business brokers or intermediaries are skilled in the process of selling a business. They are most often paid by a seller for their services. The most important factor is to have an experienced team of advisors during the sale process. This team should include a business broker/intermediary, accountant, and lawyer who have experience in the deal process.

Always remember that selling a business is usually a one time event. Preparation is a key to a successful sale. Be sure you understand the process involved.

If you have a question about selling or buying your business, give Andrew a call today at (916) 570 2674.

This article is reprinted as a courtesy of the International Business Brokers Association^® (IBBA.) IBBA is the largest international, non-profit association operating exclusively for the benefit of people and firms engaged in the various aspects of a business brokerage and mergers and acquisitions. IBBA^® has 1,950 members worldwide, with corporate headquarters in Chicago, Illinois.

As a business owner, and part of the baby boomer generation, you’ve seen your share of ups and downs in the business world.

If you are considering the sale of your business there are a growing number of brokers and mergers and acquisition specialists available to offer professional assistance to help you determine the value of your business and how the market might respond.

Most businesses track their financial performance by using balance sheets, profit and loss statements and tax returns. These reports are beneficial in determining the value of a business. In most instances it’s the cash flow that prospective buyers need to identify to better understand the health of a business. They must also understand how the money is being spent and the available opportunities to generate positive cash flow in the future.

The process of recasting financial statements is essential in determining the value of a business when the owner’s intentions are to sell. Recasting requires extensive investigation to ensure all relevant and appropriate adjustments are correctly reported. This is one of many services provided by a business broker or mergers and acquisition specialist. They will examine your financials along with the historical performance of the business, and endeavor to identify keys to future performance and market opportunities.

The recasting process identifies items such as excessive and discretionary expenses and nonrecurring revenues and expenses. Recasting provides an economic view of the company, and allows meaningful comparisons with other investment opportunities. However, the owner benefits (salary, commissions, perks, incentives, personal loans and discretionary expenses) are considered and added back into the value of the company so a future buyer can adequately assess the business, its cash flow and future earning capacity.

A great deal goes into the process of determining value and selling a business. Recasting the financial statements of a business provides an indication of the business value and helps an owner with accurate expectations. A broker or mergers and acquisition specialist will help you understand the financial statements and help you move forward toward the completion of the business sale.

If you have a question about selling or buying your business, give Andrew a call today at (916) 570 2674.

This article is reprinted as a courtesy of the International Business Brokers Association^® (IBBA.) IBBA is the largest international, non-profit association operating exclusively for the benefit of people and firms engaged in the various aspects of a business brokerage and mergers and acquisitions. IBBA^® has 1,950 members worldwide, with corporate headquarters in Chicago, Illinois.