Every business owner needs two sets of books. Normalize your financials to get the best sale price.
Updated: Oct 29, 2020
One from your Accountant with its main goal of minimizing taxes. One from your business consultant/coach with its main goal to maximize the sale price of your business when your selling.
Your accountant does your books to minimize taxes. When you want to sell or bring on investors/borrow money – we do your books to maximize taxes - well not really but to maximize profits!
Whenever we begin acting coaching or as the Chief Operating Officer for a client, the financials are usually one of two areas we start in. Profitization along with just good financials and overall 3 year business strategy.
We profitize your financials to maximize your profit and therefore the sale price of your business. Or just as important to borrow money or bring on investors.
Every business owner should know the real current value of his/her business. From that point you can start tracking real progress towards your Strategic Objective. Everything in a well- run business should be orchestrated, and this is the starting point.
“My business is now worth $4 million and in 3 years once I have met my Strategic Objective and orchestrated everything, it will be worth $8million.”
Example: Business with $380k of profit with normal books to reduce taxes. After removing expenses like his car, other expenses, spouse's salary, one time expenses etc - profit is now $670k. At 4 times profit the business is now worth $2.6 from $1.5 million
Do you think it might be worth the time to complete the above profitization of your financials?
Has your accountant offered to do this? Probably not as they do not want to have two sets of books for a client – one minimizing profit and the other maximizing it.
Is it legal? Absolutely.
Profitization is simply removing all the items in your business that are attributed to the owner that would not be there once the business is sold and also removes items that are one time or unusual. There is more to it than that and we will explain it fully in a webinar.
If you are trying to sell your business with tax minimizing books you are not only likely never to sell it and if you do, you would likely get hundreds of thousands less than you could have.
It’s a real shame to meet so many business owners who are trying to sell their business or get financing or investors and not getting the help they need.
Profiization is step #1 in knowing the real value of your business. When somone knocks on your door to buy or invest and asks what you think your business is worth and your number is arbitrary – that person looking to buy or invest will run for the hills. It tells him or her that you are not running your business based on numbers and measuring but by your gut. Both are critical but you need the numbers if you ever expect to sell or bring on money.
Profitization is one of the first tactics we undertake when we coach or work with a client in the COO position. Our goal is to help you fully orchestrate your business from strategy to the sale of your business. Imagine all of your employees and key people going in the same direction at the same time. Systems, recruiting, operations manuals, etc.