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Does Cash Flow include salaries for employees?

Does Cash Flow include profit that gets distributed to employees or is it the actual profit that the owner receives before taxes after already paying employees?

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Answers (4)
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The BAF Group LLC

I beg to differ with Shawn Malone. It DOES include Payroll, with the possible exception of the Owner's own Salary. It SHOULD include all Expenses except Debt Service, (Loan Payments for your own purchase of the Business,) frequently the Owner's Salary and Income Taxes paid. Although the vast majority of Brokers are not Accountants, they generally follow the same standards that most CPAs do, in adjusting expenses to arrive at Cash Flow figures; we have NEVER had either a Buyer's CPA or an SBA Lender argue with our Cash Flow estimates. To say that Cash Flow, "Make the business sound as profitable as possible," is a load of garbage! For a more complete explanation, check our blog post on the subject, at:

Sep 14, 2014
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Regardless of what any business broker tells you, cash flow means the actual profit of the business after ALL expenses and payroll. On most business broker websites (including this one), cash flow means: Make the business sound as profitable as possible. So please beware. I would say 99% of listings on broker websites (like this one) the "Cash flow" is simply cash left over after all expenses (not including payroll).

Sep 13, 2014
Gary Soloway
Sunbelt Business Brokers
Premium Broker

Cash Flow definition is different in everyone's vocabulary. We take cash flow to mean SDE which is Seller Discretionary Earnings. When I speak of cash flow I am speaking of earnings before interest, taxes, depreciation and amortization (EBITDA). I then include the owners salary and any discretionary spending from the owner. I would recommend looking at their profit and loss statement and compare to industry benchmarks as a place to start. Also seek counsel from an accountant to help if you are not one. Take a visit to our website and browse around to educate yourself a little more on what to expect. We built the website to educate - not sell. Good luck!!!

Heather South
Sunbelt Business Brokers

Nov 28, 2011
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The BAF Group LLC

Take nothing for granted - always check. But Cash Flow should be after all expenses, except any loan payments you would need to make in buying the business and POSSIBLY, a salary for you. All other expenses should be calculated before Cash Flow is quoted. Whether an owner's salary is already in there is up for grabs, but it should be easily determined.

Nov 25, 2011

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