Profit and Loss Statements
When selling a business, it is vital to ensure your finances are accurate and fully documented. A fully detailed profit & loss statement is the first thing that buyers want to see when considering a business for sale and it's an important part of our due diligence checks. You are welcome to submit your own profit & loss statement when looking to sell your business on Flippa, however, if you do not have one you can simply fill out one of our free online business profit & loss templates that can be found at the end of this article.
Please note that as well as a detailed P&L, buyers are looking to see proof or evidence of revenue and expenses. This can come in many forms, however a video walkthrough of your ecommerce platform or accounting software is ideal, as are financials verified by an independent accountant. Video is definitely preferred over screenshots and the best experience for a seller is to join you on a video call where you can walk a potential buyer through your finances and allow them to ask questions directly.
How to Complete Profit & Loss Statements
Each profit & loss statement has a set of instructions specific to the type of business.
The income/sales section is where you list any revenue streams that your business currently has. It is important to separate all sales streams so prospective buyers can track how different revenue streams have performed over time. For example, eCommerce businesses may sell multiple products, with Product A being extremely seasonal and product B being more consistent through the year. By separating the two products it highlights where revenue is generated in a given month.
The operating expenses section is where you list all known expenses for the business. It is paramount that prospective buyers know all fixed and variable costs. Please note, one-off costs must be included in the month that they were incurred.
The add-backs section is for expenses that are of a personal nature and in normal trading periods will not be incurred by the business. Add-backs normally include private financing costs, owners salaries, and depreciation allowances. All financial institutions including banks take into account and fully accept items listed as add-backs, providing the add-backs can be verified and are reasonable. An add-back schedule will allow a prospective purchaser and his financial adviser the ability to recognise the actual operating profits of the business before personal expenses and salaries of the business owners.
Picking the Right Profit & Loss Statement
Depending on the type of business you’re operating, you will need to pick a P&L that matches that. Below are the profit & loss statements for websites, FBA, and eCommerce businesses. If you’re not operating an FBA business or an eCommerce business, the standard business (website) P&L will work just fine. If your business operates in multiple spaces (i.e. selling on FBA, eBay, and website) then use the eCommerce P&L.
Standard Website and Business P&L
Use this template for content sites, SaaS businesses, and any other online business.
Amazon FBA P&L
Use this template for all Amazon FBA and FBM businesses.
Use this template for eCommerce stores like Shopify or WordPress; or if your business operates in multiple spaces (i.e. selling on FBA, eBay, and website)