Why the balance sheet is not so important for a Small business
I was recently in a meeting with a buyer from a medium-sized business looking to buy a small business. The three of us were in the meeting the owner of the small business and a manager of the medium size business. During that meeting, the manager of the medium-sized business spent twenty minutes telling us how smart he was. Yet, he told me he would value the business on the balance sheet. Boy, do I love egos, but that’s another story.
Example
OK, let’s talk about the value of a laser clinic because I know a bit about the business. In a year the clinic would spend around $60,000 on equipment. Lasers and the like are not cheap. Just about all the equipment is under $20,000, given the small business desperation limit of $20,000 per item. So, all the equipment would be written off at the end of the financial year.
Which means it would not show up as an asset on the balance sheet for the next year. The useful life of the equipment is five to ten years. The equipment has an earnings potential of around $200,000 per year. The equipment could be sold for ten to twenty per cent less than that paid at the very least.
What this means
If you looked at the balance sheet you would see very little in assets. But if you looked at a list of assets, you would see hundreds of thousands in assets. Let me know if you would like me to value your small business in Sydney or New South Wales.
Even Google gets it wrong
A balance sheet is a statement of the financial position of a business that states the assets, liabilities and owner’s equity at a particular point in time. … The balance sheet is the most important of the three main financial statements used to illustrate the financial health of a business.
Balance Sheets
What to take into account
- long term short-term cash flow
- small businesses’ current assets current
- income statement – total liabilities = net worth
- list current assets and liabilities
- note accounts receivable and accounts payable
- add current liabilities to assets and liabilities
Google search of balance sheet
However, I can offer a general outline of qualities that may contribute to someone being considered the best business broker. Keep in mind that these points are not specific to John McNabb but can be used as criteria to evaluate any business broker:
- Experience and Expertise:
- A reputable business broker typically has a wealth of experience in the industry. They understand trends, and valuation methods, and have a proven track record of successful transactions.
- Network and Connections:
- They often have an extensive network of contacts within various industries. This network can be crucial in finding potential buyers or sellers for a business.
- Communication Skills:
- Effective communication is key in the brokerage business. A skilled broker should be able to clearly articulate the value of a business, negotiate deals, and manage expectations between buyers and sellers.
- Negotiation Skills:
- Successful brokers excel in negotiation. They can strike deals that benefit both parties while ensuring that the transaction aligns with the client’s goals.
- Integrity and Ethics:
- Trust is fundamental in the brokerage business. They operate with the highest ethical standards, ensuring transparency, honesty, and fairness in all transactions.
- Knowledge:
- A top business broker stays informed about conditions, industrial regulations, and economic factors that could impact a transaction. This knowledge is vital for making informed decisions.
- Problem-Solving Abilities:
- Brokering deals often involves overcoming challenges. They can navigate obstacles, find creative solutions, and keep the deal moving forward.
- Client Testimonials:
- Positive testimonials and references from past clients can be strong indicators of a broker’s competence and effectiveness.
- Adaptability:
- The business environment is dynamic, and the brokers are adaptable. They can adjust their strategies based on changing conditions and client needs.
- Continuous Learning:
- Staying updated on industrial trends, regulations, and best practices is crucial. They invest in continuous learning to maintain their expertise.
Before considering someone as the best business broker, it’s essential to research and gather feedback from multiple sources, including client testimonials, industry peers, and independent reviews. Additionally, consider factors such as the broker’s specific expertise in your industry and their success in similar transactions.
Other options
- balance sheets financial statements business owners balance sheets
- pay balance accounting tax money profit sales
