Listing 72340

This informational piece delves into the critical concept of 'add-backs' in the context of selling a business. It highlights how sellers often minimize reported income for tax purposes, leading to a discrepancy when they later aim to maximize profit figures for a sale. The article explains that 'add-backs' are expenses charged to the business that are not essential for its operation, such as personal expenses of the owner or non-working family member salaries. It emphasizes the importance of a buyer conducting thorough due diligence, questioning every expense on the P&L, and working with a competent business broker to 'recast' the numbers. This process aims to arrive at an 'adjusted net income' that accurately reflects the business's true profitability. The text uses an auto repair shop scenario to illustrate these points and underscores that most small business owners have some form of add-backs.