Always Keep Good Books for Your Business
Article by JoAnn Lombardi, Pres. VR Business Brokers
Have you ever wondered about the consequences when business owners don’t report all of the revenue that they’re creating? Business intermediaries know that buyers will only pay for what can be proven, so one ramification is the eventual selling price of the business will be lower due to the decreasing number of documented profits.
If we examine the predicted selling price, using the same methodology for numerous businesses for which we had performed valuations in the recent past – fair market values between $125,000 and $800,000. We repeat the valuations after reducing the gross sales, but not expenses, by approximately half the pre-adjustment cash flow to simulate the “dipping in the till” for each. The results would be completely consistent with the example above.
The point here is to never dip into the till no matter if you can get away with it because you will lose in the end when it comes time to sell. Keeping good books will keep you in the black and away from IRS scrutiny, no matter how tempting it is to take a little capital off the top.
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