From Portland Business Brokers Group.
Start with the reported result
Gather financial statements and tax returns for consistent periods. Explain differences between them rather than asking a buyer to trust a summary without support.
Monthly results help distinguish a normal seasonal dip from a lasting change. Keep the most recent period current while the business is being reviewed.
Support each earnings adjustment
- Identify owner compensation and the work it pays for.
- Document any personal or unusual expense proposed as an addback.
- Separate financing proceeds and asset sales from operations.
- Allow for replacement labor and realistic occupancy costs.
A personal draw is a movement of money, not automatically an expense on the income statement. Count an adjustment only once and show where it appears in the records.
Choose the right earnings measure
SDE can help describe the benefit available to one working owner. EBITDA serves a different purpose when the operation must pay a management team. Neither measure replaces careful review of the business.
Ask the valuation partner which measure fits and why. Revenue alone cannot tell you what a buyer will pay.
Keep sensitive records for the right stage
Use the initial form for broad business facts. Agree how financial documents will be shared before sending returns, employee records or account details.