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Record ALL business income on the books – (any tax impact is many times LESS than the GAIN you will get from the increase in the sale price of the business!)
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If there are different income streams from separate operations, record them individually so performance can be tracked.
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Detail and describe all expenses. The SBA allows certain discretionary expenses [cell phone, car use, bundled insurance, conference travel, etc.] to be added back when calculating income. Documentation of these “Add-Backs” to improve profitability will be a big help in justifying a higher “Cash-Flow” number.
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Improve internal business efficiency (focus on reducing costs)
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- increase inventory turns by eliminating obsolete inventory
- examine each expense line, consider cheaper alternatives and/or elimination (including personnel)
- chase outstanding receivables.
It's best to start with early planning when selling your business.
By Richard Ludlow, Partner
Topics: Selling your business, selling business action plan
