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Understanding how revenue and expenses intertwine is crucial for making informed financial decisions and ensuring your venture thrives.To be clear, we’re going to be talking about net income, which revenue – expenses. The more you can increase revenue and reduce costs, the more profit you can generate from your business. From there, we can deconstruct revenue and expenses into subcomponents.&nbsp;Types of RevenueMore revenue is one of the easiest ways to increase profitability; more revenue fixes a lot of problems. Revenue can be categorized into two main streams: recurring and one-time.- Recurring Revenue: This is one of the most sought after forms of revenue, as it’s contractually locked in on an ongoing basis (whether monthly, quarterly, or annually). It refers to income generated on a predictable, ongoing basis. Examples include subscription fees, service contracts, and rental income. Recurring revenue provides a foundation of financial stability, as it allows for more predictable cash inflows and simpler budgeting and forecasting.&nbsp; - One-Time Revenue: This encompasses income generated from a single transaction. Common examples include product sales, consulting fees, and project-based work. While one-time revenue can provide a significant boost, it's generally less predictable than recurring revenue. When creating budgets and forecasts, we are more cautious when using one-time revenue for our goals. Types of ExpensesJust as important as revenue are expenses, which can also be classified into two categories: fixed and variable.- Fixed Expenses: These remain constant regardless of your sales volume. Examples include rent, salaries, insurance, and utilities. Careful management of fixed expenses is essential, as they remain constant even during periods of lower sales. - Variable Expenses: These fluctuate in line with your sales volume. Examples include raw materials, commissions, and shipping costs. Effectively managing variable expenses helps ensure your profit margin remains healthy as sales increase. The Profitability Equation: Putting it All TogetherProfitability is ultimately calculated by subtracting total expenses from total revenue. A positive result signifies profitability, while a negative result indicates a loss.Understanding the interplay between recurring and one-time revenue, alongside fixed and variable expenses, empowers you to optimize your business model. By analyzing these factors, you can identify opportunities and levers to improve profitability, whether increasing pricing, reducing variable expenses, or optimizing fixed costs. Each of these can be dissected further, but this is a starting point we can build on.&nbsp;Here are some additional items we typically evaluate:Revenue Trends: Are sales consistent? Any seasonal dips or unusual returns? Profit Margins: Are gross margins (revenue minus cost of goods sold) and net profit margins (considering all expenses) improving year-over-year? How do they compare to the broader industry? Concentration Risk: Does the business rely heavily on a few customers or vendors? Cost Management: Can we identify areas to reduce or better manage expenses (e.g., high SG&amp;A costs)? Profitability Ratios: How do metrics like profit margin ratio and break-even point look?Remember: Profitability is a journey, not a destination. Consistent monitoring and adjustments are key to staying ahead of the curve.Conclusion:Profitability = Revenue – expensesTwo types of revenue: Recurring and one-timeTwo types of expenses: Fixed and variableLess expenses + more revenue = More profit

Profitability

In today’s competitive business landscape, effective financial management is paramount; a well-constructed budget serves as the cornerstone of this strategy, providing a roadmap for resource allocation and ensuring financial stability. While traditional<a data-mce-href="https://corporatefinanceinstitute.com/resources/fpa/top-down-budgeting/" href="https://corporatefinanceinstitute.com/resources/fpa/top-down-budgeting/"> top-down budgeting</a>, which starts with a desired profit margin and allocates funds accordingly, is appropriate in some organizations and situations, it often lacks granularity, especially for small business owners. This can lead to unrealistic expectations and an inability to identify areas for cost optimization.At FinTeam, we create <a data-mce-href="https://corporatefinanceinstitute.com/resources/fpa/bottom-up-budgeting/" href="https://corporatefinanceinstitute.com/resources/fpa/bottom-up-budgeting/">bottom-up budgets</a>. This method leverages the power of your existing financial data, specifically from QuickBooks, to build a budget that reflects your actual spending patterns and prioritizes your business needs. It’s much more complex of a process, but we have found that the incremental value-add is worth it for every single client we’ve worked with.&nbsp;<h3>Leveraging QuickBooks Data: A Foundation for Informed Decisions</h3>The first step involves harnessing the wealth of information stored within your QuickBooks platform. By generating detailed vendor reports, we can gain valuable insights into your business’s spending habits. We categorize vendor spending on a monthly basis, while accounting for price increases, variable billing, and one-time expenses.&nbsp;This data analysis provides a critical foundation for the next phase: cost optimization.<h3>Scrutinizing Expenses: Identifying Opportunities for Savings</h3>Armed with your detailed vendor spend information, we can now think a bit more strategically about your spending. We determine fixed costs versus recurring expenses. For recurring expenses, we investigate the following:- Subscription Optimization: Are there subscriptions with features you rarely utilize? Can you negotiate better rates with existing vendors by leveraging your loyalty? Are there opportunities to extend payment terms with those vendors? - Vendor Alternatives: Research the market to determine if more cost-effective alternatives exist for your current vendors. Can you find a service with equivalent functionality at a lower price point?Next, we apply the “Needs vs. Wants” test. Rent, payroll, and essential utilities are non-negotiable needs. Everything else undergoes rigorous scrutiny. Does a specific expense directly contribute to increased revenue or operational efficiency? If the answer is unclear, we should consider eliminating or replacing it.Remember, effective cost control isn’t about draconian measures, but rather about strategic allocation of resources.<h3>Prioritization and Allocation: Building Your Bottom-Up Budget</h3>With a clear understanding of your spending habits and potential areas for savings, it’s time to construct your budget. Here’s what your bottom-up budget should entail:- Categorization: Group your expenses into logical categories like rent, marketing, payroll, etc. This facilitates tracking spending trends over time, including budget-to-actual variance analysis. - Needs vs. Wants Allocation: Allocate specific amounts to each expense category, prioritizing needs over wants. Be realistic about income and expenses, but leave room for unforeseen circumstances. Your budget is not a static document; it’s a dynamic tool for ongoing financial management.<h3>Continuous Monitoring and Refinement: Ensuring Long-Term Success</h3>The effectiveness of your bottom-up budget hinges on continuous monitoring and refinement. Regularly reconcile your actual spending against your budgeted amounts. Identify variances and investigate the root cause. Did unforeseen circumstances arise? Did you underestimate a specific expense category?Through ongoing monitoring, you can adapt your budget to reflect changing business realities and ensure alignment with your long-term financial goals.By leveraging the power of your QuickBooks data and employing the bottom-up approach, you can build a data-driven budget that empowers informed decision-making, optimizes resource allocation, and propels your business towards long-term financial success.

How To Create A Budget?

Imagine shaking hands on a seemingly perfect business deal, only to discover hidden problems later that unravel the entire agreement. This is a scenario that is all too common. According to Forbes, <a data-mce-href="https://www.forbes.com/sites/richardparker/2016/09/16/surprises-are-great-for-parties-but-they-can-kill-the-sale-of-a-business/" href="https://www.forbes.com/sites/richardparker/2016/09/16/surprises-are-great-for-parties-but-they-can-kill-the-sale-of-a-business/">half of deals</a> fall apart during <a data-mce-href="https://www.investopedia.com/terms/d/duediligence.asp" href="https://www.investopedia.com/terms/d/duediligence.asp">due diligence</a>. Due diligence, a meticulous investigation process, acts as the antidote to such pitfalls. It goes beyond the initial handshake, offering a deep dive into a potential partner or acquisition’s financial health, legal standing, market position, and internal operations. Spending the time to uncover critical information beneath the surface empowers informed decision making and mitigates the risk of any potential red flags.&nbsp;&nbsp;&nbsp;Key Areas of Due Diligence&nbsp; Financial Due Diligence&nbsp;This analysis dissects the target company’s financial statements, to assess profitability, cash flow, assets, and debt levels. Valuation methods are utilized to refine the price and deal terms, as well as identify any potential financial risks that could have future implications. Financial due diligence is critical in evaluating a company’s financial health and stability&nbsp;&nbsp;&nbsp;Legal Due Diligence&nbsp;This area serves to protect against potential legal pitfalls. Lawyers carefully scrutinize contracts, agreements, and regulatory compliance. It is their responsibility to uncover any hidden legal liabilities, intellectual property issues, and ensure that the deal is in line with all necessary regulations. Legal due diligence reduces the risk of any potential legal entanglement, by protecting your interests.&nbsp; Market Due Diligence&nbsp;Market due diligence plays a valuable role in evaluating the long-term viability of a potential deal. This stage involves researching the target market, analyzing industry trends and growth potential, as well as the company’s current customer base. This analysis goes beyond the surface level, delving into several key areas:&nbsp;- Target Market Analysis: size, demographics, growth trends, customer needs, etc.&nbsp; - Competitive Landscape: Who are the key players?&nbsp; - Customer Analysis: Understanding current customer base&nbsp; - Industry Trends &amp; Growth Potential: Is the company’s industry growing or shrinking?&nbsp; Analyzing these aspects of market due diligence helps to assess the overall attractiveness of the market, the target company’s competitive edge, and its potential for future success. &nbsp; Operational Due Diligence &nbsp;This step requires a deep dive into the inner workings of the target company. It evaluates management capabilities, investigates the efficiency of internal processes, and assesses the company culture. This stage is critical for highlighting any potential inefficiencies, differences in cultures, and possible risks related to production or delivery. A full picture understanding of operational strengths and weaknesses gives the acquirer the necessary data to forecast synergies and predict integration challenges.&nbsp;&nbsp;&nbsp;Benefits of Thorough Due Diligence&nbsp;While time consuming and often expensive, the value of thorough due diligence far outweighs the cost. Mitigating risks and avoiding costly surprises is the key driver for this process. Undisclosed lawsuits, deteriorating financials, and risks to current customers are all items that can hide beneath the surface of a deal. While uncovering risks is the key necessity for due diligence, there is also the possibility to uncover hidden opportunities and/or synergies. An in-depth look at a company’s customers, operations, and market position can reveal post-close opportunities that were previously undetected. A precise comprehension of the additional value that can be attained by an acquirer can play a significant role when negotiating final terms. Valuations before and after due diligence rarely remain unchanged – the majority of deals get renegotiated. The findings of due diligence are a powerful tool in negotiating a better deal. Once risks have been identified, the acquiring company then has the information needed to renegotiate terms or walk away from a deal entirely. A great way to think about due diligence is as an insurance policy.&nbsp; Challenges of Due Diligence&nbsp;Proper due diligence can provide a wealth of knowledge, however, can be a challenging process to navigate. Formal diligence typically begins after an LOI has been submitted and accepted, and that is when the clock begins. The majority of LOIs for small businesses propose to close within 30 to 90 days, which is the acquirers’ time frame for diligence (of course this varies by deal). Thus, time constraints and deal pressure are a constant burden. M&amp;A processes thrive on speed, which can lead to a rushed investigation during the diligence phase. Limited access to data can also complicate the process and even result in improper analysis. Even with confidentiality in place, companies are often hesitant to share their most sensitive data. Depending on the size and complexity of a deal, the cost of utilizing industry specialists, accountants, and lawyers can be very costly. People often take short cuts or skip a proper diligence process all together, which is a critical mistake. Potential acquirers need to find the balance between cost-effectiveness and a comprehensive analysis.&nbsp;&nbsp;&nbsp;Best Practices for Effective Due Diligence &nbsp;A defined path and strategy will help equip an acquirer to navigate the challenges of due diligence and ensure a smooth process. There are several fundamental best practices to keep in mind.&nbsp;- Planning is Key: A precise roadmap and tailored plan that takes into account specific areas of the investigation is a necessity. A refined timeline will also allow you to track milestones through the process.&nbsp; - Assemble the A-Team: Due diligence is not a solo act. Having an experienced team will allow you to effectively assess all aspects of the target company. Leveraging the varying expertise of your team will result in a well-rounded investigation.&nbsp; - Embrace Technology: While still intense, the process of due diligence has become substantially more efficient in recent years with the constant developments in technology and recently even AI. These tools can store, organize, and even evaluate data (to an extent), as well as promote communication and collaboration.&nbsp; - Communication is Critical: Acquiring a business is an intense process and selling a business is often an emotional process. This can be a tricky combination and can turn diligence sour very fast, so clear and efficient communication is vital. &nbsp;

Beyond the Asking Price: Doing the Due Diligence

There are two ways to increase profitability: generating more revenue or reducing expenses. Here are the first three places we look when we try to reduce and optimize business spending:1. Advertising and Marketing Expenses- This can be a black hole of spending with no guarantee of returns. Social media ads, outsourced calling centers, workshops, list building data, CRMs, etc… not to mention a sales and marketing team to manage these efforts. As a revenue producing team, this team and its resources can increase your growth curve and supercharge your revenue generation; however, without revenue growth, the combination of all these expenses can significantly increase your overhead and erode your profitability (I’ve seen the latter too many times). - If your sales team isn’t producing a solid return on investment (what revenue have they generated vs. how much money have you spent/invested in that team / its resources), check out this decision tree and see where your key bottlenecks are (you may need some data to find the answers to this):<figure id="figure-ljqrkakjfllyq8rp8f"><img id="ljqrkakjfllyq8rp8f" src="https://cdn.durable.co/blocks/672SCnxS9NwjiLKPN0VxnBHmEicXaKPMAJfRSepbRc1MBhZtfwrrkKkIVAvYPRQk.png" alt="man and woman sitting on chair" title="man and woman sitting on chair" class="object-cover bg-gray-100 rounded-lg md:rounded-xl lg:rounded-2xl" style="aspect-ratio: 16/9; object-position: 50% undefined%;" data-corners="default" data-aspect="16:9" data-caption="" data-positionx="50%" data-positiony="undefined%" data-fullwidth="false" data-mce-src="https://cdn.durable.co/blocks/672SCnxS9NwjiLKPN0VxnBHmEicXaKPMAJfRSepbRc1MBhZtfwrrkKkIVAvYPRQk.png" data-mce-style="aspect-ratio: 16/9; object-position: 50% undefined%;"></figure>Some other thoughts and general rules of thumb:On Advertising Agencies- If they charge you a % of advertising spend, be cautious. Their incentive is to spend more, not effectively. - Make sure you trust the individual that’s managing your account. Develop a good relationship. If there is a lot of turnover at the organization, that’s a red flag. - Can they tie their advertising / marketing work with your mission/vision/values, strategy, and value-add? If not, that’s a red flag as well. General ThoughtsPractice unreasonable hospitality – you can’t achieve this just by spending more. Justify your spending habits in sales / marketing. Is what you’re buying or spending on worth the impact it’s going to have? Put yourself in the shoes of your customer – what’s going to make you interested in your product / service?2. Software and Subscriptions- Monthly subscriptions, 12-month contracts, and up-front payments. Eww. Most software isn’t incredibly expensive (although some are), but they add up quickly. One of the hardest things about software is that their low price point makes them easy to forget. While you (as the owner) may not use each software, we have found it very helpful to audit software expenses to verify which are critical, which are nice to have, and which are unnecessary. - In order to adequately monitor your software expenses, it often makes sense to identify renewal dates, cancellation terms, and importance to your organization in a spreadsheet or notes document. If things get tight (or if you want to expand margins/cut costs), you can either cancel your subscription, ask for additional discounts, or ask for extended terms. &nbsp;3. Overtime- 1.5x. - Overtime stacks up quickly. - Plus, with new non-exempt employee rules, more of your employees will become eligible to receive overtime. Even though an hour or two of overtime may not seem like an obscene amount, it can become a massive burden on your business. Here’s an example: - A manufacturing company has 50 employees, 25 of which are exempt from overtime. &nbsp;Let’s assume everyone makes $40K per year, with 15 working 1 hour of overtime per day (beginning in 2025, everyone making less than $43,888 / year is eligible for overtime). With an hourly rate of $19.23 / hour and overtime being paid at 1.5x, that manufacturing company’s overtime would be $2,163.38 / week ($112.5K / year). Relative to the whole company’s payroll, overtime would increase payroll by 5.3% If that manufacturing company is operating at slim profit margins, an increase in payroll like this would erode the remaining profitability they do have. Not good. - We find that most overtime costs come from operations departments dealing with fluctuating demand for products / services. Balancing a timely / quality delivery of products / services and minimizing overtime is asking a lot of an operations team. Here are some potential solutions to help reduce overtime while still having exceptional results:&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; 1. Hire hourly contractors to support during high-demand times. 2. Have a well-maintained software that maximizes personnel utilization. 3. Document when demand is highest and consider changing shift schedules or hiring temporary work to support during that time (e.g. Is it a time of day?, Day of the week?, Time of year?, etc.) - Tracking overtime on a weekly, bi-weekly, or monthly basis will help you find areas of potential improvement. - Create a correlation between less overtime and more compensation for employees .If you have a profit-sharing, stock ownership plan, or bonus pool, make sure employees understand that less overtime = more profit = higher bonuses. &nbsp;Cutting expenses, especially when it comes to people, is hard. Our goal is to help you brainstorm some ways you can reduce / eliminate expenses.However, generating more revenue will typically fix a lot of your problems.

Cutting Expenses

1. Soul Searching: Are You Sure You Want to Sell?The decision to sell your business is a daunting task that is both exciting and nerve racking. After years of hard work and dedication, you’ve built something incredibly valuable, and letting go can be a complex emotional journey. But before diving into the sale process, it’s crucial to ask yourself: Are you truly ready to sell?Evaluating your motivations is crucial. Are you ready to retire, are you looking to pursue a new venture, have you reached the growth ceiling in your current market, or did a lucrative offer come your way? Selling a business is a significant life change event so honesty with yourself is paramount. 2. Planning for Success: Getting Your House in OrderA successful business sale requires meticulous preparation. An understanding of your business’s market worth is critical and allows you to set realistic expectations and negotiate effectively. Broker’s Opinion of Value (BOV) reports can be a great option for this. However, don’t neglect your financial records, because potential buyers will scrutinize every aspect of your financials to assess the business’s health. It’s also important to clean up bookkeeping and address any discrepancies to avoid raising red flags. Another major consideration is assembling your exit team; while this will vary based on the type of business and deal, it is common to have an accountant, lawyer, and transaction expert (normally a business broker) at a minimum. The accountant can ensure your financials are in order and advise on tax implications of the sale. The lawyer will handle legal contracts and navigate potential roadblocks. A business broker, with their experience and industry connections, can help identify qualified buyers and streamline the sales process. 3. The Sale Process: A Step-by-Step GuideOnce you’re prepared, it’s time to navigate the intricacies of the sale itself. The first step is to determine your timeline. Are you open to waiting for the right buyer or do you need a quick sale? Knowing your timeframe will impact your marketing strategy and negotiation tactics. Identify your ideal buyer. Strategic acquirers seeking to expand their market share, financial buyers looking for a return on investment, or even someone seeking to become an entrepreneur through acquisition (ETA) could all be potential candidates; typically, strategic acquirers will pay the highest return due to synergies associated with the transaction. A detailed understanding of market trends in your industry, the competitor landscape, and recent transactions will help you refine your target buyer profile. With a clear buyer profile in mind, you will be able to refine your approach and marketing stratifies in a manner that best caters to your ideal target. This might involve discreet marketing through a business broker or more public methods like online listings.Here is a consolidated list of the <a data-mce-href="https://www.investopedia.com/articles/pf/08/sell-small-business.asp" href="https://www.investopedia.com/articles/pf/08/sell-small-business.asp">7 common steps is selling a small business</a>:1. Identifying your reason(s) for selling 2. What is your timeline 3. Determining the value of your business 4. Assembling your team 5. Getting your house in order 6. Creating a target buyer profile 7. Formulating a post-close game plan &nbsp;4. Beyond the Sale: What Comes Next?Beyond the sale itself, a period of transition awaits. This is a time to focus on both financial security and personal fulfillment. Financial planning is a crucial consideration. Utilizing a tax advisor can help you navigate the tax implications of the sale and develop strategies to minimize your tax burden. This might involve maximizing contributions to retirement accounts or exploring tax-deferred investment options. Depending on the size and structure of the sale, you might also want to consider consulting with a wealth manager to develop a long-term investment plan that aligns with your financial goals. In the case of a retirement sale, estate planning is also necessary. Developing a comprehensive estate plan ensures your wealth is distributed according to your wishes and minimizes potential tax burdens for your heirs.But beyond finances, selling your business is also an opportunity for personal exploration. For many entrepreneurs, their business has been their life’s work. While the sale can feel liberating, it can also leave a void in the seller’s life. This is a time to consider the activities you’ve always dreamed of doing, whether it be traveling the world, volunteering for a cause you are passionate about, or finally starting that creative project you’ve been nurturing for years.

I Want to Sell My Business... Now What Do I Do?

What is a Business Valuation?&nbsp;Business valuation is the process of determining the fair market value of a company. It takes your financials and estimates what a buyer would pay to a seller in an <a data-mce-href="https://www.investopedia.com/terms/a/armslength.asp" href="https://www.investopedia.com/terms/a/armslength.asp">arm’s length transaction</a>. It goes beyond the book value of assets and considers a company’s future earning potential, its competitive advantages, and the health of the industry. The report plays a crucial role in various situations, such as mergers and acquisitions, estate planning, and, most importantly, for small business owners looking to sell their company. By understanding a business’s true worth, you can set a realistic asking price, negotiate confidently with potential buyers, and ultimately maximize profit on exit/acquisition.&nbsp;&nbsp;&nbsp;Why Do You Need It?&nbsp;Imagine you’re at a garage sale, but instead of dusty lamps, you’re selling your awesome business. You know it’s valuable, but how valuable? That’s where a valuation comes in. It’s like getting a price check on your whole company, so you don’t end up accidentally selling your masterpiece for chump change. A valuation helps you avoid leaving money on the table or scaring off buyers with a head-scratching price. It gives you the confidence to say “hey, this business is a goldmine,” and back it up with facts. So, basically, a valuation is your secret weapon for getting the best bang for your buck when you sell your baby.&nbsp;&nbsp;&nbsp;Why It’s Important to Have Before You Enter a Sales Process/M&amp;A&nbsp;A valuation is crucial before entering a sales process or mergers and acquisitions (M&amp;A) for several reasons:&nbsp;- Informed Negotiation: Knowing your company’s fair market value gives you a strong foundation for negotiation. Whether you’re selling or acquiring, a valuation helps you avoid leaving money on the table by understanding what the other party should be willing to pay or accept.&nbsp; - Strategic Decision Making: A valuation helps you assess the potential benefits of a deal. For a seller, it ensures you’re not undervaluing your business. For a buyer, it allows you to evaluate if the target company aligns with your strategic goals at a justifiable price.&nbsp; - Attracting Qualified Buyers/Sellers: A credible valuation demonstrates seriousness and professionalism. It attracts qualified buyers in a sale, as they understand your expectations and are more likely to make realistic offers. In M&amp;A, a valuation makes you a more attractive target for potential acquirers who see a clear picture of the value you bring.&nbsp; - Risk Mitigation: A valuation helps identify potential risks associated with the deal. By understanding the company’s true value, you can uncover hidden problems or overinflated expectations that could derail the process later.&nbsp; - Investor Confidence: If you’re involving investors in the sales or M&amp;A process, a valuation provides them with confidence in your understanding of the company’s worth. This can be critical for securing funding or attracting additional investors.&nbsp; &nbsp;Broker’s Opinion of Value (BOV) vs. Traditional Valuations&nbsp;While both Broker Opinions of Value (BOVs) and formal appraisals offer insights into a business’s worth, BOVs are a strategic tool with some distinct advantages:&nbsp;- Speed and Cost-Effectiveness: BOVs are quicker to obtain and substantially cheaper, typically ranging between $1-2k, while a formal valuation averages between $10-15k for a small business. This is ideal if you need a fast estimate to gauge potential market interest or determine a starting point for negotiations.&nbsp; - Market Expertise: M&amp;A experts are dialed into the current M&amp;A landscape. They consider recent trends, specific industry outlooks, and potential synergies between companies that formal valuations might miss.&nbsp; - Flexibility and Customization: BOVs can be tailored to your situation. An M&amp;A expert can highlight your company’s unique strengths, growth potential, or strategic fit with potential acquirers, aspects that a formal valuation might not capture fully.&nbsp; - Starting Point for Negotiations: A BOV provides a solid foundation for negotiation, allowing you to showcase your company’s value with real-world M&amp;A insights.&nbsp; &nbsp;Formal valuations are still crucial for securing financing or legal purposes in certain situations, but for an initial valuation or strategic decision-making, a BOV can be a valuable and efficient tool. Remember, you can always leverage a BOV to spark buyer interest and then secure a formal valuation later in the M&amp;A process.&nbsp;&nbsp;&nbsp;Timing&nbsp;While a BOV can be helpful during the official sale of a business, its true value lies in its ability to inform strategic decisions well beforehand. Consider a BOV as a financial compass – the sooner you have it, the better you can navigate your course. Having a BOV early allows you to identify areas that might strengthen your company’s value, like focusing on specific metrics or market trends. This advanced knowledge empowers you to make strategic decisions that can maximize your company’s worth by the time you’re ready to enter a formal sales process.&nbsp;We recommend performing an initial BOV 6-12 months prior to exploring a sale (or other transition event), however, we have found that many businesses utilize this tool on an annual basis to track growth and net owner equity.&nbsp; What Do We Look At?&nbsp;To create an accurate business valuation, financial information is key. This includes historical data like profit and loss statements, balance sheets, and tax returns for several years. Additionally, forecasts and projections for future performance are valuable. But a valuation isn’t just about numbers. Details on the company’s assets, liabilities, key personnel, and intellectual property are also important. Understanding the market and the industry the business operates in helps assess its overall risk and value. &nbsp; Here is an example of our standard request list: &nbsp;- Three full Years of Profit &amp; Loss Statements and Balance Sheet (2021-2023). 2024 YTD figures would also be helpful  - Three years of Tax Returns (Schedule C, 1120, etc.)  - Breakdown of the salary/bonus of all owners for the last three years (and YTD). Please include any discretionary items such as medical/life insurance, personal automobiles, travel, etc. &nbsp;Items for discussion: &nbsp;- Owners’ involvement and roles that would need to be replaced by the buyer? (This is so I can calculate replacement owner salary[ies] based on the current market). &nbsp; - Business structure? (LLC, S-CORP, C-CORP, etc.) &nbsp; - Does any customer/relationship account for over 20% of annual revenue? &nbsp; - Are customers and employees under a contract with the company? &nbsp; &nbsp;FinTeam’s BOV Process&nbsp;As part of FinTeam’s dedication to serving small businesses, we are happy to offer Broker’s Opinion of Value (BOV) reports as one of our offerings. Understanding the value of your business is not just a step that should be directly prior to an exit, it is a necessity for all small business owners. Our process is as follows:&nbsp;1. Engagement &amp; Confidentiality Agreement 2. Data collection 3. Analysis of company’s financials, operations, industry, competitors &amp; comparable transaction. 4. Meeting with Owner for FinTeam to present report 5. Any update, addition, amendments, etc.&nbsp;

The Blog

Profitability

How To Create A Budget?

Beyond the Asking Price: Doing the Due Diligence

Cutting Expenses

I Want to Sell My Business... Now What Do I Do?

Beyond the Asking Price: Unveiling the Secrets of Busines...