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Business Value Increases When Perks Decrease

Business Value

Some business owners take a number of perks from their business, from the ‘standards’ (e.g., auto expenses, memberships, and insurance plans) to ‘extras’ (e.g., entertainment, vacations, or an additional family members ‘working’).

Perks are a way for owners to add further compensation for their hard work. However, they add complications when valuing a business. When preparing your business for sale, your advisors will “normalize” your financials to account for these extras.

Also, be wary of providing products or services for cash – or perks that can’t be adequately tracked and proven in your books – as these too will decrease the value of your business…and what a buyer is willing to pay. When planning to sell, talk to your advisor about the tax benefits / value tradeoff of certain perks and consider where it would be better to drive cash to the bottom line.

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