1/26/23
Topic: Everything You Always Wanted to Know about Balance Sheets
Guests: Dan Gordon, PCO Bookkeepers & M&A Specialists, and Donnie Shelton, Triangle Home Services
In this episode we discuss:
What is a balance sheet and why is it important in the pest management industry?
How a balance sheet is "what you have" vs. a P&L that shows "what you made"
How banks, vendors, investors and others use the balance sheet
How you can use the balance sheet in your business
How Donnie uses the balance sheet
What makes up a balance sheet and the accounting formula that represents it (assets = liabilities + equity)
Why it's important to have a banker who understands the pest control industry
The problem with loans to shareholders as "other assets"
How "intangibles" (trademarks, customer lists you purchased) play a role
The current ratio (current assets / current liabilities), a liquidity ratio that measures a company's ability to pay short-term obligations
How the equity number on your balance sheet is different from net worth
Why Dan says debt to assets ratio is more useful than debt to equity for pest control
Resources mentioned:
Balance sheet information from the PCO Bookkeepers & M&A Specialists Pest Control Industry Cost Study
Liquidity ratio information (current ratio, quick ratio, acid test) from the PCO Bookkeepers & M&A Specialists Pest Control Industry Cost Study
Leverage ratio information (debt to equity, debt to assets) from the PCO Bookkeepers & M&A Specialists Pest Control Industry Cost Study
Notable: "If I'm sitting on cash I'm tempted to pay stuff off. Fight that urge. Don't get rid of your cash. Every time I've done it, I've kicked myself." —Donnie Shelton
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