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. Our team of Certified Business Intermediaries begin by recasting the financial statements.
Most businesses track their financial performance by using balance sheets, profit and loss statements and tax returns. In most cases it’s the cash flow that prospective buyers need to identify to better understand the overall health of the business. The process of recasting (normalizing) the financial statements is essential in determining the value of a business.
The recasting process identifies such items as excessive and discretionary expenses and nonrecurring revenues and expenses. Recasting provides an economic view of the company and allows meaningful comparisons with other similar businesses.
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 the Most Probable Selling Price of a business and recasting the financial statements is an important first step.
Recasting the Financial Statements
