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.
|Helpful Resources To Assist In Selling And Buying California Businesses|
|Brad Steinberg, Broker - Laundromat Specialists
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.
|Joe Sandbank, Esq. - Legal Services
I have provided legal counsel to business buyers, sellers and brokers for over 17 years. With prior experience as a business broker and SBA loan officer, Joe brings both a practical and legal approach to all aspects of the business acquisition process.
|Helen Yoo: Escrow & Bulk Sale Services - 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.
|Elizabeth McGovern: Escrow Services - SF 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.
|Diane Boudreau-Tschetter: Escrow And Bulk Sale Services
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.
|Mark Chatow, Esq.: Legal Services For Buying, Selling Businesses
Mark has a broad range of small business purchase & sale experience from analyzing potential acquisition targets to successfully guiding buyers and sellers through the purchase & sale of small businesses. Mark can assist with contracts, negotiations, legal matters, etc. Reach Mark at 949-478-8393.
|Janet Carrera - Escrow & Bulk Sale Services - 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.
|Willard Michlin, CPA, Certified Fraud Examiner, Due Diligence Services
Willard Michlin, CPA #106752, offers buyers step by step training & assistance in doing Due Diligence Services when they are thinking of making an offer, or are in process of investigating a business purchase. He helps to determine the actual net profit even when there is cash. Call 805-428-2063.
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