Misuse of Advisors
After you complete this guide you will be in a position to use the
financial professional you engage correctly.
Most business buyers do not completely understand how the
relationship between advisor and client should work and as a result
misuse their advisors and, as a result of this misuse, fail to attain
their goal of business ownership.
Perhaps the best way to illustrate the ideal relationship between client
and advisor would be compare the role of a spiritual advisor to that of
an accountant. A young man
approaches his clergyman and asks “Should I marry this woman?”
The clergyman’s only answer is NO.
Why? Simply because
asking such a question indicates that the young man isn’t sure of what
he is doing. If he is not
mature enough to answer the question himself is he mature enough to
handle marriage? That
question has to be answered by the young man himself and is not a
decision that should be shifted to another.
Assume for a moment that you are an accountant or CPA and that
your best friend in the world has just thrust a few tax returns into
your hands and asks: “Should I buy this business?”
Did you feel a chill go up your spine?
The real life accountant certainly would have.
Your fear would be that your friend doesn’t know what he’s
doing. You also are mindful
of the litigious society in which we live.
Your answer to his question eventually would probably be NO.
Use of Your Financial Professional
You should have completed the following tasks
BEFORE you approach your financial advisor
Audit Tools on Disk makes it easy to calculate:
comparative Analysis of Income Statements and Balance Sheets
a 5 Year Comparative Ratio Analysis
a Gross Profit Test
the Company’s Industry and that of its major customers
a full understanding of the opportunity the business represents
a Pro forma of expected Company performance under your ownership.
enter one to five years of financial data from accounting statements or tax
returns, answer a few questions regarding the business, make a few decisions -
press a key and PRESTO! The program has calculated it all.
What’s in this book?
of Private Companies and their accountants work diligently to minimize declared
income on their tax returns in order to avoid taxes.
Determining the real earnings for a Private Company is therefore
sometimes difficult, especially if it is a Cash business.
This book and its companion Software will lead you through the process of
determining a company’s real earnings using the same methods
the Internal Revenue Service uses.
How to determine the real
profitability of an ALL CASH
Business using IRS
An example of actual IRS
Audit Instructions for a “Cash Business”
Compare your Target
business operating results with those of its industry to reveal or confirm
opportunities for improvement
How and why Public company
accounting practices differ from those of Private businesses – How to
avoid costly mistakes that are made by those who do not realize the
financial professionals find it difficult and frustrating to analyze the
financials of companies with less than 5 million in sales
Ratio analysis – What
the various ratios mean and reveal about a company.
How to use the Ratios to confirm and expose opportunities for
How the IRS uses Ratio
Analysis to determine un-reported income
Simplify the construction
of Balance Sheets and Income Statements
Jargon” in to plain English that a non-financial entrepreneur can
A Comprehensive Data
Gathering worksheet is included – Compile data needed to demystify much of
the financial data. Without this
information much of the financial position of the company and, the
opportunity the company represents, will remain a mystery
the REAL EARNINGS and potential earnings for any business.
they say on TV - But
wait, there's more. . .
Field Agent's Audit Guides by Industry
Tax Return Data Compiled by Industry
Ratio Analysis Generator
Audit Tools on Disk has a
unique ability to show you the real profits of any business - even Cash
Field Agent Audit Guides by Industry - The Actual IRS Audit instructions and guides
for scores of industries from
Architect to Veterinarian
Tax Return Data by Industry - Data collected from actual Tax Returns - Use this
data to determine the most profitable industries.
Audit Tools on Disk will automatically generate Comparative Income
Statements and Balance Sheets
Analysis Reviewer ~ Checks out factors other than "the numbers"
You can perform countless "What
if" scenarios and calculate scores of possible transaction structures
quickly and easily to determine a Fair Price
Test and Justification of Purchase Price Calculations - Make sure the
business can afford the price, and that your Rate of Return is commensurate
with the risk involved - this is a double check on whether or not the price
projections of profitability under your management - Easy and
straightforward calculation that employ the scores of historic
operating ratios generated by the program.
Flows and working capital requirements - Make sure you will have adequate
reserves and money to grow your new business
Ratio Analysis with explanations - Scores of ratios are calculated by IRS Audit
Tools on Disk along with an explanation of what
each ratio means, why the ratio is important and how it is calculated
to visually view key factors
Tax Return Data by Industry
Who would have believed you would have direct access to Internal Revenue Service
information directly from your computer and the IRS Audit Tools on Disk CD-ROM.
The financial data collected from tax returns filed with the IRS is compiled in
spreadsheet format by Industry, Business Form, and other criteria. We
have made it easy for you to use the data to justify/ratify your
assumptions and compare your target business to other businesses of the same
size within the same industry. For example, you might want to use this
data to ratify that the Gross Profit percentage you expect to maintain is
realistic and attainable. This would be especially helpful in adding credibility
to your projections and increasing a lender's confidence.
to CD ROM technology, the copious amount of IRS data is readily available to you
as dynamic information. You can forget about the tedious data input that
is required with static information found in books, articles and reports.
IRS Audit Tools on Disk has organized the data on CD-ROM - ready for you to use and
analyze as you wish.
Field Agent Audit Guide by Industry
In addition to the IRS financial data the CD-ROM contains the
IRS's internal Audit and Investigation Guides for businesses from
Architect to Veterinarian. Thanks again to CD-ROM technology, the
vast amount of information involved is readily available for download to your
printer or for on screen review by industry .
Audit Guide provides an overview of the industry under review to familiarize the
you with industry lingo, practices and then outlines just what questions should
be asked, what documents should be requested and reviewed etc. Actually the IRS agent's
Audit is essentially the same as the Due Diligence Review one should conduct
before acquiring any business. Investigate and Audit your target
business using IRS techniques and information
I have finished
reading "Determine the Real
of any Company ...." and it was extremely easy to read and understand.
can keep the cost to you very low by providing the data on the IRS Audit Tools on Disk's CD-ROM rather than in a telephone book size document.
much does it cost?
Not as much as
you might think. Your accountant or CPA would certainly have to charge you
several hundred dollars or more to produce the review "IRS
Audit Tools on Disk"
produces. It is also unlikely your accountant wants to spend the time
required to teach you how to interpret financial statements. Accountants
and CPAs make their living
interpreting financial statements for their clients and not by teaching clients how
to do it themselves.