Murphy Business Broker business sales

WHAT IS SDE? SDE stands for Seller’s Discretionary Earnings. It is the Total Owner Benefit a business produces and is generally used for evaluating businesses with gross annual sales that are under $1,000,000. For a larger business, EBITDA is more frequent use. It is assumed with SDE that there is one (1) and ONLY one (1) full time, working manager in the business. If in reality, the owner is not working in the business, then the money spent on labor that could be saved with a full-time working owner should be added back to the Net Profit to get the SDE. In contrast, if multiple partners are working in the business, only one partner would be considered. The amount a capable employee (or employees) would be paid to replace the additional partner(s) would be subtracted from the reported earnings. Other items, such as Interest and Depreciation, are also added back. See formula below: SDE FORMULA Profit on Income Taxes + Nonrecurring Expenses – Nonrecurring Income + No...

Do You Accrue for Capitalized Expenses? Vincent Murphy business broker Boston MA Related Articles 1 GAAP Rules for Capital Expenditures 2 Accounting Rules for Expensing Vs. Capitalizing & Amortizing Costs 3 GAAP: Accounting Rules for Capitalizing Costs 4 How to Determine Assets and Expenses for Accrual and Cash Accounting One of the most important rules in accounting is the matching principle. This rule requires that revenues be recorded in the same periods as the expenses spent to produce them, just as it requires expenses to be recorded in the same periods as the revenues produced through them. Capital expenditures are capitalized as assets due to this accounting rule, as is their subsequent depreciation or amortization depending on how they are capitalized. Capital Expenditures Capital expenditures contrast with expenses in that they produce benefits for the business across multiple periods rather than one. As such, their value needs to be expens...

Small Business » Finances & Taxes » Profit & Loss Statements » What Is a Recasted Profit & Loss? Vincent Murphy Business Broker  Related Articles 1 Matching Concept Vs. Accrual Accounting 2 The Accrual Method of Accounting for Nonprofits 3 How to Determine Assets and Expenses for Accrual and Cash Accounting 4 Does a Cash Basis S Corporation Have Retained Earnings? Many small business owners use cash accounting instead of accrual accounting. In addition, they often run a number of personal expenses through their companies or ratchet up their contributions to company retirement accounts to increase their retirement savings and reduce their current taxes. Because of this, it is sometimes necessary to recast earnings. When you recast earnings, you adjust the earnings to reflect accrual methodologies or remove the impact of the additional expenses. Recast To recast is to cast anew or to reconstruct. When you recast earnings, you ...

Recast Adjustments – Unlocking Hidden Value You are here Vincent Daniel Murphy Business Broker Boston Massachusetts, Tampa FL, Miami FL  By Paul Chameli, Managing Director One of the many advantages of private business ownership is the ability to manage business transactions in a manner that coincides with the owner’s personal interests.  Hiring certain family members, paying gifts to workers to thank them for loyalty, making charitable donations from the company, deferring the recognition of revenue, and taking an above market salary are all ways (legal, of course) in which private business owners can use their discretion to manage their business and in many cases reduce their taxable income.  Most of these business transactions have the effect of reducing the reported income of the Company, thus minimizing income taxes.  When marketing a business for sale, however, a business owner should be motivated to demonstrate the highest earnin...

Recast Adjustments – Unlocking Hidden Value Recast Adjustments – Unlocking Hidden Value You are here By Paul Chameli, Managing Director One of the many advantages of private business ownership is the ability to manage business transactions in a manner that coincides with the owner’s personal interests.  Hiring certain family members, paying gifts to workers to thank them for loyalty, making charitable donations from the company, deferring the recognition of revenue, and taking an above market salary are all ways (legal, of course) in which private business owners can use their discretion to manage their business and in many cases reduce their taxable income.  Most of these business transactions have the effect of reducing the reported income of the Company, thus minimizing income taxes.  When marketing a business for sale, however, a business owner should be motivated to demonstrate the highest earnings possible to potential buyers....

Recast Financial Statements Definition Financial statements of the business that are adjusted to reflect the actual financial benefits of business ownership. What It Means Most small businesses are managed to minimize taxable income. Thus, it is often necessary to make adjustments to the reported financial statements in order to express the actual cash flow benefits available for the owner. Adjusting the business financial statements facilitates its comparison to the industry standard ratios. Here are some  Balance Sheet  items that may require adjustment: Accounts receivable. Review an accounts receivable aging report and remove uncollectible accounts, taking them as a bad debt expense. Inventory  that is not good and sellable. Inventory that has become damaged or obsolete should be adjusted out. Prepaid expenses should be adjusted out if they do not remain with the buyer after the business purchase. Cash and cash equivalents are typically ret...