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May 9, 2012

What's Your Right Asking Price

 
In the following example, shaded cells indicate areas where the income statement is adjusted to reflect earning potential - called recasting or normalizing your financials.

Annual Seller's Discretionary Earnings

 $

Annual Revenue

 

Annual Cost of Sales

 

Annual Expenses

 

Annual Net Income

 

Adjustments for Interest, Depreciation, Tax and Amortization deductions

 

Add-back for Interest paid on loans

 

Add-back for Depreciation

 

Add back for Taxes paid

 

Add back for Amortization

 

EBIDTA (Earnings before Interest, Depreciation, Taxes and Amortization)

 

Adjustments for Personal, Discretionary and One-Time Expenses

 

Add-back for Owner's Salary, Payroll Tax, Benefits

 

Add-back for Family Member Wages, Payroll Tax, Benefits

 

Add-back for Owner/Family Personal Auto Use

 

Add-back for Contributions/Donations

 

Add-back for Fair-Market Rent Adjustment

 

Add-back for Owner's Insurance premiums

 

Add-back for Legal, Accounting, Tax services

 

Add-back for Owner Retirement Plan contributions

 

Add-back for Travel/Entertainment Expenses

 

Add-back for Subscriptions and Memberships

 

Add-back for extraordinary, one-time, non-recurring expenses reflected on Income statements

 

Adjusted Statement of Projected Annual
Seller's Discretionary Earnings

 

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Mike Handelsman is group general manager for BizBuySell.com and BizQuest.com, the Internet's largest and most heavily trafficked business-for-sale marketplaces. @BizBuySell