When considering the sale of your business, determining an appropriate asking price, as well as probable deal structures is a critical first step in the process.
Most businesses track their financial performance by using balance sheets, profit and loss statements and tax returns. These reports are beneficial in determining the value of a business. In most instances it’s the cash flow that prospective buyers need to identify to better understand the health of a business. They must also understand how the money is being spent and the available opportunities to generate positive cash flow in the future. The process of recasting financial statements is essential in determining the value of a business.
Recasting requires extensive investigation to ensure all relevant and appropriate adjustments are correctly accounted for. VMW Business Brokers can examine your financials along with the historical performance of the business, and endeavor to identify keys to future performance and market opportunities.
The recasting process identifies items such as excessive and discretionary expenses and nonrecurring revenues and expenses. Recasting provides an economic view of the company, and allows meaningful comparisons with other investment opportunities. Owner benefits (salary, commissions, perks, incentives, personal loans and discretionary expenses) are considered and added back into the value of the company so a future buyer can adequately assess the business, its cash flow and future earning capacity.
A great deal goes into the process of determining value and selling a business. Recasting the financial statements of a business provides an indication of the business value and helps an owner determine the Most Probable Selling Price.
Through the process of recasting, VMW Business Brokers will help you understand the financial statements and help you move forward toward the completion of the business sale.
