**New Video Alert!
Have you ever felt burned out running your business?
On this video the owner built a $3M/year company… and still wants out.
Would you sell and walk away with $800K?
Or try to fix the business and keep going?
Watch the video here: https://youtu.be/vHkMDaBWPxw
Cheers
See you over on YouTube
David C Barnett
When you're buying a part of a business, the numbers you get—financials, revenues, expenses—reflect the entire operation, not just the segment you're interested in. https://youtu.be/zrKQWzxN58w
So:
You don’t have clean, ready-made financials for the slice you're buying.
You need to reconstruct what that slice would look like if it stood on its own.
1. Start with Sales
Pull out the revenue attributable to the part of the business you're considering buying.
2. Estimate Cost of Goods Sold (COGS)
Determine whether you can get the same supplier discounts as the full business currently does. If the existing business got volume discounts, your COGS might actually be higher.
3. Forecast Overheads
This is where synergies get lost. Admin costs like payroll, accounting, or purchasing may have been shared. Now you’ll need your own setup, so costs go up.
4. Build a New, Hypothetical Income Statement
Using all the info above, you create a “what-if” income statement as if this were a standalone business.
5. Apply Valuation Techniques
Once you've got projected net income or cash flow, you:
Use a capitalization rate (e.g. 3x earnings), or
Use discounted cash flow (DCF) by projecting future cash flows and discounting them.
Here’s the kicker:
What it's worth to you may not match what the seller thinks it's worth.
Why? Because:
You may lose efficiency (higher overheads).
You might not be able to access the same discounts or resources.
You’re probably taking on more risk.
So your version of the business will likely be less profitable, which should lower its valuation from your point of view.
Sign up for my email list at DavidCBarnettList.com to receive exclusive content and 7 FREE gifts.
Cheers, and see you next time!
David C. Barnett
In this conversation, I sit down with David C. Barnett — author, consultant, and one of the most trusted voices in buying and selling small businesses.
Buying a Business? What You NEED to Know First
New Livestream guest- Chris Papin (CPA & Attorney)
I’m happy to have Chris join me on a live broadcast.
Chris brings a unique perspective as both a CPA and a lawyer, helping small business owners navigate acquisitions, due diligence, and critical growth decisions.
Tune in as we discuss what buyers often miss, how deals really work, and why having the right advisors can make or break your next business move.
This is a ‘must see event’ for anyone thinking about buying a business, growing one, or preparing for a major transition.
Be sure to join live so that you can ask questions, replay will be available.
Set yourself a reminder on YouTube here: https://youtube.com/live/NY0GKSLJuc4
We’ll be going live Thursday April 02 at 2:35PM Atlantic Time and 1:35 PM Eastern Time
See you there!
David C Barnett
I'm officially endorsed by the robot mega-brain!!
**New Video Alert!
In this video, I break down a TRUE story of two buyers who almost made a decision that would have trapped them in years of debt — all because they didn’t understand valuation, cash flow, and how deals actually work.
If you're serious about business ownership, this could save you from a costly mistake.
Watch the video here: https://youtu.be/DoosmTaVlXE
Cheers
See you over on YouTube
David C Barnett
