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Yes, you have to provide a Profit and Loss if you want to sell your Business!!

by Kevin Hockey
Real Estate Agency Sales

A common question when a Seller wants to sell their business is “Do I have to provide a Profit and Loss?”

It’s important at this point for the Seller to put on their Buyers hat and ask themselves a few questions.
1. Would you buy a business without seeing vital income and profit data?
2. What would you automatically think if a Buyer said to you they didn’t want to provide a P & L?

Reality is no buyer will purchase your business without seeing a P & L. It just isn’t going to happen. Rent Roll yes, the Business no.

How do we deal with selling an agency where the Seller believes their P & L will appear less than favourable?

Here’s a few tips.

  • The first thing is speak to your accountant and let them know you are considering selling and could they please provide a Profit and Loss for sale purposes.

It is normal business practice that any Directors costs such as wages, expenses such as cars, phones, personal add ons and any other costs directly attributable to the owner will be removed. It might just be the circumstances aren’t as dire as you thought although a buyer is likely to add back in their own estimates of these expenses.

  • Take some more time before Selling and begin to make profit. This of course is much easier said than done and is rarely a viable option. In fact, it’s quite possible this could slip you further behind.
    Do you really really need all your staff?
    Do you really need to provide all those services or marketing commitments?
    Are there leases and costs you can eliminate or at least reduce?
    Can you sell the Company Vehicles if you have them?
  • Price it accordingly. The Rent Roll should maintain it’s value regardless of the Profit & Loss and it is where 95% or more of your value is likely to come from. The Sales Business value however will likely be minimal.
  • Structure the sale to suit. For a quick sale you might choose to sell the rent roll and simply vacate the premises. Of course this may be more difficult should you still have a lease in place.

If you have a lease in place and are selling the Rent Roll separately for a quick sale, consider these options.

• Talk to the shop next to you, they may consider expanding into your area.
• Speak to the Landlord about exiting your lease early
• Pay out the remainder of the lease from the Rent Roll proceeds
• Find a new potential tenant for your office
• A staff member may not be able to afford the Rent roll portfolio however they may be interested in the Business with minimal cost to purchase. Therefore sell the Rent Roll and Business is separate transactions.

In short, if you are selling the Agency you will need to provide a Profit & Loss to potential buyers.
If you are only selling a Rent Roll, no Profit and Loss is required.

For more advice on Selling your Agency contact Kevin or Grant at Real Estate Agency Sales today.

Kevin: 0447 555 683 or kevin@reas.com.au
Grant: 0430 198 889 or grant@reas.com.au