Recasting Financials   

By: Ken Lewellyn, CBI

As a business owner, and part of the baby boomer generation, you’ve seen your share of
ups and downs in the business world.

If you are considering the sale of your business there are a growing number of brokers
and mergers and acquisition specialists available to offer professional assistance to help
you determine the value of your business and how the market might respond.

Most businesses track their financial performance by using balance sheets, profit and loss
statements and tax returns. These reports are beneficial in determining the value of a
business. In most instances it’s the cash flow that prospective buyers need to identify to
better understand the health of a business. They must also understand how the money is
being spent and the available opportunities to generate positive cash flow in the future.

The process of recasting financial statements is essential in determining the value of a
business when the owner’s intentions are to sell. Recasting requires extensive
investigation to ensure all relevant and appropriate adjustments are correctly reported.
This is one of many services provided by a business broker or mergers and acquisition
specialist. They will examine your financials along with the historical performance of the
business, and endeavor to identify keys to future performance and market opportunities.

The recasting process identifies items such as excessive and discretionary expenses and
nonrecurring revenues and expenses. Recasting provides an economic view of the
company, and allows meaningful comparisons with other investment opportunities.
However, the owner benefits (salary, commissions, perks, incentives, personal loans and
discretionary expenses) are considered and added back into the value of the company so a
future buyer can adequately assess the business, its cash flow and future earning capacity.

A great deal goes into the process of determining value and selling a business. Recasting
the financial statements of a business provides an indication of the business value and
helps an owner with accurate expectations. A broker or mergers and acquisition
specialist will help you understand the financial statements and help you move forward
toward the completion of the business sale.

Tennessee Business Services serves small business owners by offering services such as bookkeeping, taxes, IRS representation, business valuations, business turnaround consulting, sale of businesses and franchise advising.  Lewellyn is one of six business brokers in Tennessee to hold the Certified Business Intermediary designation, awarded  by the International Business Brokers Association.  Tennessee Business Services is located in Hendersonville, TN and can be reached at www.tnbizserv.com,  info@tnbizserv.com, or (615) 400-2150. 

The International Business Brokers Association is the largest international, non-profit association operating exclusively for the benefit of people and firms engaged in the various aspects of a business brokerage and mergers and acquisitions. IBBA has 1,950 members worldwide, with corporate headquarters in Chicago, Illinois.