Today we’re tackling an important question about your business exit strategy.
CPA On Fire’s managing member, Ron Parisi, spoke with John Lee Dumas of Entrepreneurs On Fire about this very topic. He dove into EOFire’s assets – their brand, audience, sponsors, email list, and episode library – and how those contribute to the quality of revenue for them. It is a great resource and we highly encourage you to give it a listen. The episode is out on January 14th and we’ll link it here when it is available. Ron will be on Entrepreneurs On Fire every month with a tax and accounting tip for listeners, so be sure to tune in!
Whether you are just starting your business or if you have years of entrepreneurship under your belt, you want to be thinking about the future of your business. One day you might wake up and you decide you no longer want to do what you’re doing or maybe you have somebody comes along with an investment offer that you need to contemplate. It is always a good idea to put yourself in a potential buyer’s or a potential investor’s shoes when running your business.
When evaluating what your business is worth, you will want to know and list your assets. For an online business these could be things like cash, inventory, sponsors, your email list, your social media presence, and/or your website.
Balance Sheets & Profit and Loss Statements
The two most important financial statements of your business are your balance sheet & your profit and loss statement. Just looking at basics, your balance sheet is your picture in time. It shows what your assets were, what your liabilities were, and what the owner’s equity is as of a specific date. Your profit and loss statement looks at periods of time, whether it be last month, last quarter, or last year. Those are the two distinguishing factors between the profit & loss statement and balance sheet.
Quality of Revenue
There’s a term called quality of revenue and that looks at your recurring revenue, contracts with your customers, contracts with any sponsors and determines the quality of that revenue. A potential buyer or investor will want to see that there’s going to be an ongoing revenue stream post-sale, so the quality of revenue is important. Looking from that revenue lens, you almost have to back into your assets – how do the assets of your business contribute to that quality of revenue?
Ultimately, it’s important to have a qualified accounting and tax professional in your corner to help you though something as important as selling your business or adding investors. Make sure to seek their help to make sure you are doing what’s best for you and your business.
CPA On Fire has vast experience helping online entrepreneurs grow exponentially in their business. We provide real time numbers via visual dashboards for you to fully grasp where your business is at. We take the intimidating aspect of running your business – your financials – and make sure everything is handled fully. Get freedom from accounting, tax, and regulatory and get scalable growth, peace of mind, and profit. Let’s connect and see what CPA On Fire can do for you.