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Thread: P & L Statement Question

  1. #1
    SGF Supreme Grumble Framer DTWDSM's Avatar
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    Default P & L Statement Question

    Was talking to a framer today about the possibility of purchasing their customer listing/mailing list, whatever you want to call it.

    While talking they mentioned that they had it on their P&L statement at $X amount and wanted to sell it for $X amount less 60%.

    My question is....do you list your mailing list/customer list on your financials?
    Tim McCann, Deck the Walls
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  • #2
    PFG Picture Framing God PaulSF's Avatar
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    I don't. Maybe that's in "goodwill"?
    http://www.spitzbusinesslaw.com
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    SPFG Supreme Picture Framer God Jeff Rodier's Avatar
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    Sounds kind of crazy unless they purchased a list from another framer and decided to list it as an asset. How much will you give me for the local phone book. Makes about as much sense as carrying a mailing list itself as an asset.
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  • #4
    SGF Supreme Grumble Framer Elaine's Avatar
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    not normal. Usually this is considered goodwill when a valuation of the business is completed when the business is for sale...

    Elaine
    Elaine Slater-Kogler, C.I.D
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    SGF Supreme Grumble Framer David N Waldmann's Avatar
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    On a P&L? That would mean it's an expense. If THEY are renting/buying a mailing list on a monthly/yearly basis from someone else that would make sense. But the Value of an Asset will never be on a (properly complete) P&L. Assets are on the Balance Sheet, and the depreciation or amortization of assets are on the P&L; however, because of the nature of depreciation and amortization, the expense that does show up on the P&L is only a fraction of the whole every month/quarter/year.
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  • #6
    SGF Supreme Grumble Framer Grey Owl's Avatar
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    A customer list can be listed as an asset on your balance sheet, but be careful. There have been some changes with the IRS in the last few years on valuing customer lists, and the time period you can depreciate such assets.

    If you are thinking of buying the list from another framer, check with your accountant on how you can expense / depreciate it. I don't believe it qualifies for accelerated depreciation.
    Russ Wood / Grey Owl Framing
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  • #7
    SGF Supreme Grumble Framer DTWDSM's Avatar
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    Ok we are all on the same page it sounds like. I thought it was odd when the person said this but i am not an accountant. I know that the list was not purchased/rented so no way to expense it.
    Tim McCann, Deck the Walls
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    SGF Supreme Grumble Framer JFeig's Avatar
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    "Goodwill" is not a depreciateable asset under normal conditions.
    Jerome Feig CPF
    http://www.minoxy.com

  • #9
    MGF Master Grumble Framer
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    Default value of a customer list

    In our business, I don't think customer lists, with the exception of our own, have much value. I know that 90% of my customers are my customers because they like the way I do things and are unlikely to go somewhere else because of a mailing. They are independent folks and would start the search for a new framer by asking their friends. There might be an exception if they received a personal letter from me recommending someone else. (Since I plan on being carried out of here, that is unlikely).

    But the list itself really doesn't have much value. If the business is closing, you will get a percentage of them anyway. Your money might be better spent buying lists from a professional mailing house or ad agency that specializes in direct mail. If you decide to go prospecting, don't forget to have them run the list against your customer list so your customers don't get the idea you don't know who they are.

    It is surprising how many business owners honestly don't know the difference between a balance sheet and a P&L. Unless they have a CPA on call, they usually don't last past the first downturn.

  • #10
    SGF Supreme Grumble Framer HB's Avatar
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    Quote Originally Posted by wvframer View Post
    In our business, I don't think customer lists, with the exception of our own, have much value. ...
    I believe that a client list can be worth quite a bit under ideal circumstances. I know if I would move my equipment to a different city, and was going to carry on there (moving for personal reasons), or if I was to retire, I would be able to justify a good price for my list IF someone was going to take over the location, was going to operate the business in a similar fashion and was capable at doing that!

    Who pays for starting up a successful business? The owner at first, but can usually transfer some of that into the value of good will (which is on the balance sheet, one way or another)
    "Thanks to all Grumblers - grrrrrreat site!" HB (not home based)

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