Buying a Business: Beware the P&L

Buying a Business: Beware the P&L

‍

The financials may look clean… and the P&L may appear solid.
But when valuing a small business—whether you’re buying or selling—the raw P&L almost never tells the full story.

Owners often blend in personal expenses, one-time costs, and non-market compensation. That’s why the first step in any credible valuation is normalizing the financials.

Here’s how to do it in 30 minutes:

1. Review the P&L

Scan for big swings, unusual accounts, or anything that doesn’t align with normal operations. Flag inconsistencies.

2. Fix Owner Compensation

Replace owner wages, distributions, perks, and family payroll with a market-rate salary for the role.

3. Remove Non-Recurring Items

Strip out anything that won’t repeat:

• One-time legal fees
• Major repairs
• Settlements
• PPP/ERC impacts

4. Pull Out Personal Expenses

Extract anything not essential to operations:

• Vehicles
• Travel
• Entertainment
• Cell phones
• Family wages

5. Adjust for Market Reality

Normalize areas like related-party rent, sweetheart vendor deals, or under-/over-spending.

6. Recalculate EBITDA

What you have now is the true economic performance—the number buyers, lenders, and valuation professionals actually trust.

At GW-Legacy Advisors, we help business owners, buyers, and accountants complete this process quickly and defensibly—whether for estate planning, gifting, lending, or a potential sale.

If you’d like a free normalization checklist or Excel template, send me a message.

‍
Or connect directly at:
🌐 www.gw-legacy.com | 📧 mwillard@gw-legacy.com

‍