How Much Is Your Franchise Actually Worth Let’s look at the differences between income statements and balance sheets, and what you can learn from them.
Balance Sheet
Income Statement
The balance sheets pulls together three things: what your business owns (assets like property, equipment and inventory); what it owes (liabilities including loans, expenses, payroll); and what’s left after liabilities (your equity as an owner).
The income statement shows you your bottom line, which is your revenue minus expenses—profit—during a specific period. It’s a great way to see the impact of certain costs (e.g., looking at your biggest expenses) on your bottom line.
In addition to tracking assets, liabilities and the resulting equity, the balance sheet shows the total worth of a company, not just how it’s doing on a particular time period (like the income statement).
But just knowing dollars in, dollars out, and what’s left over every month won’t tell you what your company is actually worth. To do that, you need your balance sheet to show you the big picture.
Looking at both your income statement and balance sheet is super important. It can show you red flags, like the fact that perhaps your liabilities are higher than your assets. To a potential buyer of your franchise, that would show a weak financial position.
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