Reviewing the Income Statement: Two Items

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Are Your Sales Trending Up?

This is a given requirement before any business will sell. If your sales are trending down, it's best to revisit your marketing strategy prior to listing your business to sell (unless your strategy is to exit the business).

The buyer will analyze the sales numbers. They will want to know what strategy you have in place that will support these sales figures when you transfer the business over to them — we have more information about building a marketing strategy.

Additionally, the buyer will want to know:

• how strong is your brand and goodwill
• how strong is your product or service offering
• how are your customer contracts supported and renewable
• how dependent is the business on the owner:
  
  note: your business will be more valuable if it is NOT dependent on you. If your business brand, product, customer contacts, etc., are dependent upon your management, you must prep your business to carve yourself out of the picture by:
  
  
1. sharing your expertise and contacts with key employees
2. bringing key employees to the front of the line to assume responsibility -- you begin to move to the back of the line
   
3. assigning key relationships with employees so that the customer feels comfortable not having you in the picture.
   

Are Your Expenses Being Managed?

The second line item the buyer will scrutinize is your expense items. They want to see expenses that are strategically managed — in other words, expenses incurred must support the operating business and marketing strategy. Frivolous expenses only raise questions about your financial assumptions.

Prep your business by removing:

• expenses that are personal or non-business related:
  you accomplish this by paying off company loans made for personal or non-business use
  
  
• expenses that do not produce income:
  analyze individual line items and pay-off or terminate service relationships for expenses that do not generate income.

Prep your business by documenting:

• equipment purchases that support the business operations and sales strategy
  
• expenses items that are part of your marketing strategy — view Marketing Planning Model