I hear enough about this little secret from my colleagues, on a consistent enough basis, that I know that business owners are hurting themselves by thinking only about getting short-term windfalls.
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The thing to keep in mind as we talk is that if you are an owner of a business, there is a day when you will sell that business. You need to keep that in mind as you deal with businesses that throw out a lot of cash on a daily basis.
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Examples of this would be carwashes, laundromats and vending machines.
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Why is it so important to make sure that you put all the proceeds into the bank and report it all?
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First, if you haven’t reported everything, you will have an awfully hard time finding a buyer that will buy into the explanation you give them for why your sales are recorded as about 30% less than you tell them.
For you to find someone like that you will have to come across someone that really understands the particular type of business you are trying to sale.
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If you are fortunate enough (and that’s a big if) to find a buyer that is willing to accept your explanation, then that buyer will also have to be willing to buy your business for cash or you will have to be willing to finance it to them.
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Why would you have to be willing to finance it? There is no bank in the world that would give out a loan based upon you saying that your figures are that far off. They would only accept the recorded figures and base any loan upon those figures.
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Even if all of these things come into play you will be forced to sell the business for a lot less than it is worth. Nobody will pay you for a business where the debt load can’t be justified based upon the price asked for.
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So you’ve got to ask yourself this important question: Do I want the money now or later. If you take it now and it isn’t recorded as income or profits in the business you will pay for it later. It’s your choice.
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