Gross income is defined as “all income the business received before any cost-of-sales have been deducted.” Cash Flow Cash flow is arrived at by “starting with your net (before tax) profit. Then add back in any payments made to the owner, interest and any depreciation of assets.” For example, if the net profit before taxes was $100,000 and the owner was paid $50,000 then the cash flow is $150,000.
EBITDA stands for “earnings before interest, taxes, depreciation and amortization” andis an approximate measure of a business’s operating cash flow.
Fixtures, and equipment that will remain with the business, such as desks, office cubicles, décor elements of a restaurant or showroom, computers and office machines, pots and pans, dishes, display cases, manufacturing equipment, etc. depending on the type of business.
Projected Gross Revenues (total sales)
Minus COGS (variable costs)
Equals Gross Profit Margin
Minus Fixed Costs & Depreciation
Equals Net Profit before Taxes
Pricing for profit formula (ex: per item):
a. Price for product/service
b.Less Cost of Goods Sold (raw material to makeor produce product service)
c.Equals Gross Profit
Calculate a Break-even Analysis. This is a simplified formula which is broke down into two parts. The first formula is a per item or per hour service formula:
Gross Revenue (price)
Less Variable Costs (or COGS)
Equals Gross Profit per item/service hour
This second formula is based on expenses for a period of time that you are calculating your break-even:
Divided by Gross Profit (from the first step)
Equals Break Even (volume-needed amount to cover costs)
If the business has real property that can convey with the business, the value of the property may be included in the asking price or kept separate as an optional purchase.
Once you select the business, we arrange a meeting with the business owner to tour the business. Then you can make an offer for to purchase the business. Your offer will include price, down payment and financing.
Your offer is always contingent upon the Seller proving his or her representations.
Escrow & Closing
After escrow receives signed instructions, the escrow officer will contact government tax agencies for clearance and publish your fictitious name filing, enabling you to open business and banking accounts. Also during this time a Notice To Creditors will be published allowing anyone with a claim against the business to step forward.
You’re In Business:
Congratulations, you’re in business. There is no bigger thrill, no better feeling than knowing that you are in control of your destiny.