Crazy how some sellers get confused by GROSS numbers they are pulling in

[TrustButVerify]

http://www.bizbuysell.com/Business-O...UzZCUzZA%3d%3d

When dealing with some sellers, it's a big tip off when they keep talking about the gross this and gross that.

As we all know, gross means *almost* nothing and sometimes it's like pulling teeth to get the actual net income numbers.

I would guess that this site probably nets about $400 a month after the owners time is taken into account and you're also dealing with high ticket items which implies higher risk/fraud/shipping issues.

[TeamFreedom]

That's just Gross!

Sorry couldn't help the joke in my head that I had going should we had been sitting in a coffee shop talking about this.

Numbers seem so hard with people. Whether you are asking for a loan, asking to be paid, or whatever. I have the same issue. It's hard psychologically to put a price on things.

I just say to people, tell me straight up what the deal is. I understand. I need to know. No crap flinging.

[DomainMagnate]

isn't "cash flow" pretty much same as net profit?

[akirk]

I will counter this - it is useful to see gross figures and overheads / expenses...
you can derive your own nett very easily - but it shows you where there might be savings...
quickest way to increase value in a company is to cut costs - so if you see a website with high Gross and low Nett - then there is potential to reduce overheads / expenses and increase the Nett with no need to increase the customer base at all...

all figures are useful

Alasdair

[TrustButVerify]

isn't "cash flow" pretty much same as net profit?

Yes, they are. But I had found this site for sale somewhere else and it was a 700 word description of the website but never mentioned net profit. Then I found the bizbuysell ad and found the net profit. It was as if the net profit was some trivial piece of information not to be concerned about.

I will counter this - it is useful to see gross figures and overheads / expenses...
you can derive your own nett very easily - but it shows you where there might be savings...
quickest way to increase value in a company is to cut costs - so if you see a website with high Gross and low Nett - then there is potential to reduce overheads / expenses and increase the Nett with no need to increase the customer base at all...

I will counter your counter
Expenses are claimed to be $200 a month. Yes, gross numbers are useful, but if they give you gross and overhead and never mention product costs, (which is what happened earlier) you can't get an accurate picture. After seeing the cash flow numbers as above, they tell me that this site has high gross and a low net profit. And a site like this there would likely be nothing much you could cut.

[Clinton]

all figures are useful

Lies, damned lies and statistics.

[TrustButVerify]

Lies, damned lies and statistics.

And that reminds me, of a personal favorite of mine - a highly recommended read when doing due diligence.

How to Lie With Statistics
http://www.amazon.com/How-Lie-Statis.../dp/0393310728

[akirk]

Yes, they are. But I had found this site for sale somewhere else and it was a 700 word description of the website but never mentioned net profit. Then I found the bizbuysell ad and found the net profit. It was as if the net profit was some trivial piece of information not to be concerned about.

No Cash Flow and Net(t) profits are not the same at all - you can have a company with $billion a year cashflow and no profits at all Gross or Nett...

I will counter your counter
Expenses are claimed to be $200 a month. Yes, gross numbers are useful, but if they give you gross and overhead and never mention product costs, (which is what happened earlier) you can't get an accurate picture. After seeing the cash flow numbers as above, they tell me that this site has high gross and a low net profit. And a site like this there would likely be nothing much you could cut.

Understand - and yes it is good to know the Nett profit - but in any business, online or off, the principles are the same - and one reason for buying a business is to look to find ways of rebalancing the way it does business:
1 - check for savings
2 - sell more to the same customers
3 - acquire new customers

that is the order in which it is easiest to increase nett profit.
most companies are good at no 1 if run well - but it is a key area for aquisition
no 2 is the area many focus on (hence Sainsbury's 'try something new' campaign - sell two new things to your current customers and turn the business around
no3 is what many people think of - but is the most difficult...

so for me I would want to know all figures

Alasdair

[eddiebooth]

Agree with Alasdair, cashflow is not the same as net profit.
Definition of cashflow is "a movement of money into or out of a business, project or financial product"
Wikipedia give a more detailed explaination here

[ClaytonL]

I believe DM was using the BizBuySell definition of cash flow

Arrived at by "starting with your net (before tax) profit. Then, add back in any payments made to the owner, interest and any depreciation of assets." For example, if the net profit before taxes was $100,000 and the owner was paid $70,000 then the cash flow is $170,000.