Adjusted Net Income - Adding Back In One Time Expenses


A BizBen client and advertiser emailed this question about the sale of her small business which relates to selling a business that is relatively new but is doing well and how to represent the adjusted net income to potential business buyers.

 

Here is her questions about representing the adjusted net income accurately:

"We had a potential buyer come in the other day, without any experience in retail. Our business is showing zero adjustable net because we put small profits from our first full year of operation back into the business.

This particular buyer, and some others, all keep asking about adjustable net as a prerequisite for consideration, in spite of the fact that there is obviously room for lots of growth here, and that we had a great year (in terms of gross sales) last year. In fact, our first full year grossed a lot higher than most businesses like ours do in TWO years.

I understand  that profit is the motive, and we can show where we've reinvested, but it seems as if most potential buyers are looking for more of a 'sure thing'. We know this is a great business, and the only reason we're leaving is to retire. How does one sell a business in the early stages on authentic potential, and a great start?"

You hit it on the head when you said you have and are putting all of your profits back into the business. Make a list of all those expenses and show them to serious business buyers when you are representing the total adjusted net as of now. Investment dollars put into the business - especially "one time expenses" can be "added back" to adjusted net income and represented as such.

Categories: Business Valuation Issues, Selling A Business







  Helpful Resources To Assist In Selling And Buying California Businesses
Diane Boudreau-Tschetter: Escrow & Bulk Sale Services - CA

California Business Escrow, Inc. is a full service independent escrow company serving all of California and has expertise in a wide range of escrows. Our team prides itself on providing an exceptional escrow experience. For more info phone Diane Boudreau-Tschetter at 888-383-3331 or 209-838-1100.

Janet Carrera: Escrow & Bulk Sale Service - SF Bay Area

Redwood Escrow Services, Inc. is a full service, licensed independent escrow company. We are EAFC Fidelity bonded, fully insured & licensed with the Department of Corporations. Committed to offering our clients the most comprehensive variety of escrow services available. Phone Janet at 510-247-0741.

William F. Ziprick, Attorney: Legal Services For Buyers And Sellers

Through creative problem solving, attention to detail, accessibility, & understanding that unnecessary delay is often a deal killer, I work closely with my clients and other professionals to consistently achieve a high rate of closings. Office: 909-255-8353, Cell: 509-951-7230.

Shalonda Chappel: Escrow & Bulk Sale Services - Southern California

Escrow services to brokers/agents, sellers, & buyers. Established 43 years. Extraordinary service. Experienced with handling difficult transactions. One stop for all your escrow needs: Bulk sales, lien searches, UCC searches, liquor license transfers, publishing & recording services. 951-808-3972.

Helen Yoo, New Century Escrow - Escrow Services In Southern California

New Century Escrow, Inc. is a fully licensed & bonded independent escrow company. Over 20 years combined experience in handling bulk escrow transactions. Multi-lingual staff that speaks your language, including Korean, Chinese, Vietnamese. Call Helen Yoo direct at 626-890-1151.

Brad Steinberg, Business Broker: Laundromat Specialist

PWS is the leading laundromat broker in California. Since 1968 PWS has brokered over 2,500 laundromat sales. With over 90 employees dedicated to the coin laundry industry, PWS has 18 licensed agents, a 3 person in-house finance department, 10 service technicians and a 20 person parts department.

Elizabeth McGovern: Escrow Services - San Francisco Bay Area

McGovern Escrow Services, Inc., is a leading independent escrow company. We are a trusted partner with our clients, assisting them through the tangled bulk sale & liquor license transfer process. We provide attentive, quality & innovative customer service. Phone Elizabeth McGovern at 415-735-3645.


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