Issue link: https://www.massageandbodyworkdigital.com/i/68165
VALUATING YOUR PRACTICE Another factor when valuing your business is determining your motive for selling, Ducoff says. "The purpose of obtaining a business valuation is to determine whether your practice or spa is saleable," he says. "Then you have a very important question to ask yourself before even getting started: Why do you want to sell? Believe it or not, your reason may raise red flags with prospective buyers. Being ready to retire or move on to other things will likely not cause a second thought, but if the business is in trouble, you'd better try to fix the problems before putting it on the block. For what it's worth, if you fix the problems, you may decide not to sell." Ultimately, the final sale price of your massage and bodywork business will depend on how badly the buyer wants to buy, and how badly you want to sell. A valuation expert can help you meet in the middle, but the buyer and seller must both be willing and excited about the transaction. That's the bottom line. WHAT DOCUMENTS DO I NEED? In addition to a formal business appraisal, if available, Lee says there are several important documents commonly used for business valuations. Here is a short list: AdjuSTed PRoFIT ANd LoSS STATeMeNT "You must adjust the P&L [profit and loss statement] because many small business owners will deduct legitimate perks, such as the use of their vehicle, pay themselves higher-than-average salaries, etc.," Lee says. "You'll need to 'add back' these discretionary expenses so that a buyer can see what it will truly cost him or her to run your business. Depending on the buyer, you may need to have your financials audited as well." ACCouNTS ReCeIVAbLe ANd ALLoWANCe FoR bAd debTS "These two accounts must be examined together," Lee says. "The buyer should make certain that the net receivables on the balance sheet are really collectible by examining the percentage of receivables and bad debts for the past three years." PRoPeRTY, PLANT, equIPMeNT "A professional appraisal of buildings and equipment, if any, is good," Lee says. "However, don't forget that the value of used tangible items is usually very low." dePReCIATIoN SCheduLeS These will show tangible personal and real property. Some experts say federal tax returns are needed as well, as they show the detail of income sources and expenses, and can be used by business brokers to uncover hidden assets or cash streams. Chad J. Simmons, author of Business Valuation Bluebook, How Successful Entrepreneurs Price, Buy, Sell and Trade Businesses, says other documents used to substantiate business performance include a record of customers' visits connect with your colleagues on massageprofessionals.com 69