How to Paint a Clear Picture of Your Dealership’s Success to Buyers

Normalizing your financial statements is a crucial step involved with selling your dealership. When you normalize your financial statements, you’re painting a more precise picture to potential buyers of your past and future success. This process consists of removing items like one-time payments, non-recurring payments, and unusual or discretionary expenses and purchases. By doing this, it showcases the “pure” results of the business itself without the clutter of personal owner influence. This makes it more attractive to potential buyers. 

How It’s Done

Normalizing your financial statements should be done in accordance with valuation standards and the guidance of a qualified, reputable business valuator. It’s important to work with a professional through this process as they’ll be able to point out and eliminate all of the line items that aren’t necessary—leading to a clear financial picture. Items that will be removed in order to normalize your financial statements are:

• Non-Recurring Revenue and Expenses: This will include one-off expenses such as software installation fees, severance packages, fraud recoveries, and PPP funds.
• One-Time Gains and Losses: These are items like the sale of a large asset, or the acquisition or sale of a business unit or property. One-time gains and losses that likely won’t be a common occurrence in the future will be removed.
• Non-Operating Items: You may have received interest income from investments unrelated to the company’s regular income—this will be taken off.
• Discretionary Expenses: These are those expenses all organizations have. Some examples are: wages to the owner’s teenager for sweeping the floor once in a while, travel meals and entertainment that may be business related but are not necessary to generate the revenue presented, and salaries to family members who may be semi-retired or are in more of an advisory role and not essential to operations.

Once the above items have been removed, you’ll work with your financial advisor to reconcile the adjusted financial statements to the historical statements in an inviting and easy-to-follow presentation. This will really showcase the horsepower of your enterprise!

Work with an Expert

If selling a dealership is on your horizon this year, then you’ll want to work with an experienced advisor who can help you to prepare and normalize your financial statements. With decades of financial and dealership operation experience, I can guide you through this process and ensure that your financial statements are polished and your dealership is ready to hit the market.

Stacey International is a group of credentialed, knowledgeable, experienced senior executives focused on helping business owners buy and sell businesses.  If you are ready to exit or just starting to think about it, give us a call. We can help you get the highest possible selling price now or in the future. Let’s connect.