We see it all the time. A Seller asks to meet with the objective of selling their, RCFE home and business. They have a general idea what their home could sell or lease for, and have a number in mind for what they want to sell their business for. They know basically how much revenues and expenses are each month, but they don’t have financial statements which support the price they are hoping to get for the business.
While it is a relatively simple matter to determine the price of the home by performing a Comparative Market Analysis and touring the facility, to ascertain the price of the business is a bit more complex. The price of the business is based on the Profit and Loss (P&L) statements for the prior 2 years and the current Year-To-Date (YTD).
We know it may be cumbersome to prepare P&L statements each month. However, if you are thinking of selling your business, it is IMPERATIVE to have these prepared. NEVER UNDERESTIMATE THE VALUE OF WELL-PRESENTED FINANCIAL STATEMENTS! They will help sell your business for top dollar.
When we say financial statements, we are primarily referring to your P&Ls. For the most part, balance sheets are not required. But if there are large capital expenditures, such as replacement of a roof, water heater, plumbing or electrical system, you need to be sure to note it. Such upgrades add value to your RCFE because they improve your property and are expenditures that a new buyer won’t need to finance out of future cash flows.
Another two balance sheet items you need to disclose are significant changes in Accounts Receivable or Accounts Payable. Major increases in Accounts Receivable signify that your residents are not paying their monthly rents on a timely basis. This may be indicative of a deeper problem, as it calls into question whether there are underlying issues with resident dissatisfaction or inability to pay their monthly fees.
Significant increases in Accounts Payable reveal that the seller is not paying their debts on time. Is there a problem with cash flow? You need to reveal that.
BOTTOM LINE: If you are considering selling or leasing your RCFE home and selling your business, it is essential to have accurate P&Ls for the prior 2 years and the current YTD.
We would be happy to assist you in the compilation of your P&Ls! Michelle is a CPA, skilled in preparation of financials. We offer this as a value-added FREE service with every listing.
We look forward to serving YOU!
If we can be of assistance with your purchase, sale or lease of an RCFE or other property please call us today for your FREE Consultation:
Michelle (949) 397- 4506 & Melvyn (949) 500-3630