I have been looking at a lot of broker-supplied deals. To a one, when they calculate SDCF they include the full owner's salary to the last penny. In the HBR Guide to Buying a Small Business it says to exclude the amount of a fair market salary for a general manager when calculating earnings and thus the offer.
Opinions on this?
2. Will he keep doing this after the business is sold? It's usually safe to assume he won't.
3. If so, what would it cost to hire someone else for this role?
Remember, the business needs someone in charge, and you should include the cost for this position.
Look out for the following:
1) The owner doesn't include his salary in the profit and loss statement; he only takes owner draws. 2) The owner has set a very low salary for himself.
Overall you can often save a lot of money in this area by getting advice from an expert. If you have more questions, feel free to send me a direct message.