Preparing Your Business For Sale – A Series

Tam-Bay Commercial Realty, Tampa FL Commercial Real Estate Broker

Tampa Bay Commercial realtor


Most important factor in selling our business is to report ALL of our cash two (2) years before selling. Value of a business is in direct relation to the net income it generates. It also affects how much a buyer is willing to pay, and how much a lender is willing to lend.

Income from tax returns, POS (point of sale) credit card statements, and bank deposits is the only verifiable income sources that a buyer and lender will accept.

If a business owner fails to report $50,000 cash with a tax bracket of 28%, their tax liability is $14,000. If that business is valued at 2x cash flow, they just lost $84,000!  (100,000 value – $14,000 tax liability = $84,000 loss).

Here’s a more profound example: I just closed on a business where the seller had to reduce the price of her business by $210,000 because she hid $20,000 from the IRS, which had a tax liability of only $6,000.  Yes, lost $210,000 by saving $6,000! The unreported cash skewed her debt-service-coverage-ratios. Price had to be discounted by $210,000 in order to increase the DSCR to the standard. May sound confusing, but that’s the gist.

Don’t be penny wise and dollar foolish… report your cash!

Call me at 813.493.2913 for a free consultation.

Thomas Brubaker, Business Broker

TAMBAY Business Brokers, Inc

Member: IBBA & BBF

Tom Brubaker