|
Ad Backs
-
Ad backs include all expenses relating solely
to the owner plus non-cash expenses such as
"Depreciation" and
"Amortisation". Once off
expenses such as "Loan Establishment
Fees", "Legal Fees" or
unusual repairs can be added back but need to
be examined carefully to be sure they are
additional to the ordinary expenses of
running the business. These expenses are
"Added Back" to the net profit of
the business to establish a true net profit.
Ad backs will generally include:- Owners
Salary or Directors Fees, Managers Salary,
Interest Paid, Amortisation. Sometimes part of
the "Wages" and "Super"
can be added back where they are paid to a
family member. See
a sample Top
Adjusted Net Profit - The adjusted net profit
is the actual net profit shown on the
financial statements PLUS the ad
backs. This indicates the true profit of
the business if the owner/ proprietors
expenses, non-cash expenses and one off
expenses were left in the business.
Top
Goodwill - Sometimes defined as "The value accruing to a
business in respect of it's position, it's
customers and it's ability to produce a
profit." Putting a price on goodwill can
be difficult unless you have other similar
business sales to compare to. Protected
businesses (ones that you can't just start)
have higher "Goodwill" factor than
those you can start almost anywhere. Compare a
Newsagency with Lotto to a corner
Delicatessen. Goodwill is the amount
remaining after deducting plant, equipment and
stock.
Top
Financial Statements
-
Financial statements for a business relate to
a set trading period such as a financial year.
They provide a record of cash inflows
and outflows, the amounts owing and owed,
details of plant & equipment for
depreciation purposes and normally comprise of
the following:-
Profit and Loss Statement
Balance Sheet
Depreciation Schedule
Accountants Notes.
Top
Profit & Loss
Statement - The Profit and Loss Statement
forms part of the "Financial
Statements" of a business. It
represents a historical record for a set
period of time of the cash inflows and
outflows of a business. Careful analyses of
the Profit & Loss Statement may indicate
expenses that can be 'added back" to show
the true net profit.
Top
Balance Sheet
-
The Balance Sheet is a snap shot of the
financial position of a business as of a
certain date. It details assets, liabilities,
debtors, creditors, proprietorship for the
business. By comparing Balance Sheets from
year to year a financial picture of the
business can be obtained.
Top
GST
-
From July 1 2000 the Federal government
introduced the Goods and Services Tax into
Australia. The commencing rate of GST is 10%.
and it replaces a number of wholesale taxes on
a broad range of products. All businesses are
required to have an "Australian Business
number (ABN) and be registered for GST if
their anticipated turnover is $50,000 or over.
Unregistered businesses are unable to claim
credits for GST paid. Business purchasers must
be registered for GST at the time of
settlement.
more information is available from the Australian
Taxation Department here.
(See GST & Business Sales in
"Articles")
Top
POA
-
Price on Application. Owners do not wish to
disclose price.
Top
PSAV
-
Plus stock at Valuation. Stock is estimated in
the offer to purchase and the final figure is
established after an independent stock take at
settlement. See Articles
for more information.
Top
WIWO
-
Walk-in Walk-out. Price is inclusive of
goodwill, plant & equipment and stock.
Top
ROI
- Return on Investment
ROI is now the yardstick
used by many Business Valuers and Business
Brokers to determine the price of a business
based on sales of similar businesses across
Australia. Return On Investment is the
adjusted net profit of the business divided by
the total purchase price expressed as a
percentage.
Mainly applies to businesses up to $2m
That is
|
ROI%
|
=
|
Adjusted
Net Profit x100
|
|
|
|
Purchase Price
|
|
|
|
|
|
OR
|
|
|
|
|
|
|
|
Purchase Price
|
=
|
Adjusted
NOP x 100
|
|
|
|
ROI
|
|
Profit $100,000 Purchase Price
$200,000 ROI 50%
Back to Top
|
