WHat is normalizinG? 

In most private enterprises Financial Net Income is driven by Tax Planning.  In order to maximize your selling price, the first thing we do is Normalize Net Income.  This means adjusting accounting net income for:

  •      One-time and Non-recurring Revenue and Expenses such as consulting fees or the Gain on the Sale of Equipment.

  •      Non-essential and discretionary expenses like personal vehicles and discretionary meals & entertainment are added back to Net Income.

  •     Necessary expenses are adjusted to market rates, such as Owner’s and family members wages and Rent when the facility is also owned by the Seller.

This process determines the actual cash flow to owners and is generally significantly higher than Accounting Net Income.

       Key Factors in Assessing Risk to establish the Required Rate of Return/Multiple:

  •        Liquidity – how easy is it to sell

  •        Size and Age of the Enterprise – a large established business is worth more than a similar smaller or newer business

  •        Scale-ability – future growth potential

  •        Reliability of Financial Information

  •        Replaceability of current Owners

  •        Historical and Future expected performance