Selling your Business??--Yesterday is History

Posted by: Fernando Simo

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As we brokers begin the process of selling someone’s business, we normally ask the seller to provide four specific items: Year-to-Date Financial Statements; at least three (3) years tax returns; a list of furniture and fixtures and equipment; the lease agreement. All of these items will provide a piece of the puzzle in valuing someone’s business and determining what the right price for it should be. In this article, I will focus on financials and taxes.
 
For most sellers, providing the last three (3) years tax return, in addition to current financials, becomes a real difficult chore.  On the other hand, as I mentioned in previous articles, buyers rely heavily on good, recent, financial data to make a decision about the business. Yesterday is history!! This is particularly true in a recessionary economy, where significant drop in revenues and profits results in lower market values.  
 
Now let’s assume that the seller provides the tax return and current financials data and we effectively “price” the business when we list it. It does not end there. What we need is an update of the financials, at least every six months. The primary reason is, of course, valuation. The value of your business may go up based on the current financials—after recasting. 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 the price in order to be competitive in the market place.
 
The problem some of us brokers face is that once the seller provides the initial tax and financial data, getting current financials is like “pulling teeth.” The good news is that those who keep their listing “current” have a greater chance of selling their business than those who do not. Help your broker help you and remember, yesterday is history, today is what counts!! 
 
Should you want to know more about buying or selling a business in Central Florida, please contact Fernando Simo at 407-361-8886, email me at fsimo@tworld.com or please visit my webpage at www.bizbuyorsellflorida.com .