If you’re running a product-based business, one of the most important financial metrics you’ll encounter is Cost of Goods Sold (COGS). COGS refers to the direct costs of producing the goods that a company sells during a specific period. Accurately calculating COGS is essential not only for determining profitability but also for understanding inventory performance, tax implications, and overall financial health.

At the heart of the COGS calculation are two often-overlooked components: Beginning Inventory and Ending Inventory.

What is Beginning Inventory?

Beginning inventory is the value of the inventory that a business has on hand at the start of a financial period. This inventory includes all goods that are available for sale, whether finished or in-process, and is essentially the leftover stock from the end of the previous accounting period.

For example, if you closed last year with $25,000 worth of inventory still on your shelves, that amount becomes the beginning inventory for the new year.

What is Ending Inventory?

Ending inventory, on the other hand, is the value of goods remaining at the end of the financial period. It is determined through physical counts or inventory management systems and reflects what hasn’t yet been sold.

Ending inventory will become next period’s beginning inventory, and its accuracy is critical because it directly affects both your COGS and your reported profit.

The COGS Formula

The relationship between inventory and COGS can be summarized by the following formula:

COGS = Beginning Inventory + Purchases During the Period – Ending Inventory

Let’s break this down:

• Beginning Inventory: What you started with.
• Purchases: New inventory bought or produced during the period.
• Ending Inventory: What’s left over.

What you’ve sold during the period is everything you had (beginning inventory + new purchases), minus what’s still unsold (ending inventory).

Why It Matters

1. Accurate Profit Reporting: COGS directly reduces your gross income. If your ending inventory is overstated, your COGS will be understated, and you’ll show an inflated profit. The reverse is also true.
2. Tax Implications: Since COGS is deductible as a business expense, its accuracy affects your taxable income.
3. Cash Flow Insight: Monitoring inventory levels helps businesses manage cash tied up in stock. Too much ending inventory may signal overstocking or slow-moving products.
4. Business Valuation: For business buyers, brokers, or investors, inventory and COGS data provide critical insight into operational efficiency and pricing strategy.

Conclusion

Understanding how beginning and ending inventory impact your cost of goods sold is fundamental for maintaining accurate financial statements and making informed business decisions. Whether you’re preparing for tax season, seeking investment, or just looking to improve margins, take the time to track your inventory correctly—your bottom line depends on it.

Why the Transition Period Is Critical When Selling a Business

For many business owners, selling their business is one of the most significant transactions of their life—financially, professionally, and emotionally. Whether it’s a main street business or a lower middle market company, the process doesn’t end at closing. One of the most important, yet often underestimated, elements of a successful business sale is the transition period.

A transition period is the time following the sale during which the previous owner assists the new owner in assuming control of the business. This phase can last anywhere from a few weeks to several months, depending on the complexity of the business and the buyer’s experience.

Why the Transition Period Matters

1. Ensures Continuity and Stability

Buyers—especially first-time owners—are understandably anxious about running a business they didn’t build. The transition period provides a critical cushion that allows for a smoother handoff. Customers, employees, and vendors all benefit from seeing the outgoing owner actively supporting the transition. This continuity helps maintain operations, staff morale, and client relationships.

2. Preserves Institutional Knowledge

Most businesses rely on a wealth of “unwritten knowledge” that resides in the seller’s head: supplier relationships, customer preferences, pricing strategies, workflow systems, and more. During the transition, the seller can transfer this knowledge, helping the buyer avoid missteps that could impact performance or profitability.

3. Builds Buyer Confidence

The presence of the former owner during the transition boosts buyer confidence. It shows commitment to the long-term success of the business and reassures the buyer that the seller stands behind the company’s value. This confidence often translates into a faster learning curve and quicker decision-making.

4. Protects the Value of the Sale

For sellers, the transition period can protect the sale’s value—especially if there’s a seller-financed note or an earn-out provision tied to future performance. Helping the new owner succeed improves the chances of full payment and post-sale satisfaction.

Tailoring the Transition to Fit

No two businesses—or buyers—are alike. That’s why an experienced business broker will help negotiate a transition period that fits the needs of both parties. For a small service business, a two- to four-week part-time handover might be sufficient. For larger or more technical businesses, a structured, multi-month transition with optional consulting afterward may be more appropriate.

Key Areas to Cover in a Transition Plan

• Training on daily operations and systems
• Introduction to key clients, vendors, and employees
• Transfer of licenses, accounts, and contracts
• Continued consulting or advisory support, if needed

Final Thoughts

A well-structured transition period can make the difference between a successful ownership change and a bumpy handoff that puts the business at risk. At Suncoast Business Consultants, we ensure our clients understand the strategic value of a thoughtful transition and help structure it to serve everyone’s best interests. When buyers feel prepared and supported, and sellers feel their legacy is preserved, it’s a win-win for all involved.

Ready to sell or buy a business with confidence? Contact us today to learn how our expert guidance can make all the difference.

Introduction

In a competitive business landscape, business owners have to be strategic and prepared before selling their valued businesses. The truth is that you cannot have an exit strategy without proper planning. When the time comes to sell your company, failure to plan would have an impact on the value of your business.

Oftentimes, businesses owner wonders “how much is my business worth,” and the answer is simpler than most stakeholders realize. When it comes to buying a business in South Florida, there are more than enough investment opportunities in Miami

Keeping that in mind, let’s take a look at basic steps and considerations that would allow you to prepare and sell your business:

Incentive Employees and Build Business Relationships

It is crucial to make sure your most treasured employees and manger are incentivized. This would allow you to avoid basic conflict of interest and last-minute power plays. At the same time, make sure to establish your key business relationship with advisors.

In fact, better relationships with a lawyer, investment agency, and accounting firm will help you accelerate the selling process. You can count on your business advisors for up-to-date insights and an ideal timeframe to sell your business.

Ensure Successful Scale

You’ve probably worked hard for years to build and grow your business and now you should adopt a strategic approach to sell your company. Your first step should be to make sure your business is scalable enough for new buyers.

Review Administrative Items

Before you decide to sell your business, one of your main considerations should be to organize business records and ensure business operations are optimized. Naturally, you don’t want to make an impression that your business operations and administrative affairs are in shambles to potential buyers.

Eliminate Business Expenses

Most private companies operate to cut back on their taxes. Your end-game is to highlight high profitability to make a good first impression in front of potential buyers. Your objective should be to cut down expenses that are no longer critical to your business operations. When it comes to selling your business, make sure to compensate in the form of tax write-offs prior to negotiations.

Create a Suitable Growth Plan

On top of administrative control, optimized operations, and high-profit margin, make sure to create a realistic growth plan before selling your business. The trick is to highlight that your business has many opportunities in the coming years, and you’ll notice an increase in potential buyers. In terms of meaningful growth, make sure to highlight that your business has had market credibility for at least three years.

Final Thoughts

Whether you run a small or mid-size business in Miami, your first objective should be to understand the market value of your entity from the perspective of the buyer. Ordinarily, business owners often have preconceived notions about the specific sales price. Realistically, this is counterintuitive for sellers and often pushes away potential buyers.

So, find out how a potential buyer plans to use your business before official negotiations. On the surface, selling a business in Miami may seem like a daunting task, but you need to focus on essential considerations to ensure thorough preparation.

When buying a business in Miami or selling it, it’s critical to put your emotions aside to conduct an accurate business appraisal and determine a reasonable and competitive selling price. You’ll need to complete an objective analysis of the company, research the current market, and consider hiring a professional business appraiser. The sale of your business will demand quite some time, and once the work is done, you’ll need to figure out how to manage the earnings.

Business valuation isn’t easy unless you’re a natural-born business or numbers person (or, say, an accountant). However, here you will learn how to do business valuation before buying or Selling A Business In South Florida.

Do the correct valuation before Selling A Business In Miami

Even if you’ve never heard the word, if you’re aware of the EBITDA concept, you may already know about SDE or seller’s earnings. To refresh your memory, EBITDA stands for earnings before interest, taxes, depreciation, and amortization — in other words, it’s a company’s pure net profit.

Business owners calculate SDE to estimate the actual value of their company for a new owner, similar to EBITDA. SDE will include expenses such as income reported to the IRS, non-cash expenses, and whatever revenue your company truly earns. In contrast to EBITDA, you’ll factor in the owner’s compensation and benefits into your SDE estimate.

Because small-business owners frequently expense personal benefits, large businesses typically use EBITDA estimates to value their businesses, while small businesses commonly use SDE. Therefore, it’s also critical that potential customers comprehend SDE. Most likely, business owners will give you that amount. Therefore it’s crucial to understand how the owner arrived at that figure and what these figures mean for the actual company.

Start with your pretax and pre-interest earnings to calculate your company’s SDE. Then, as company expenses, you’ll bring any items that aren’t vital to operations, such as vehicles or trips. Your SDE can include employee outings, charitable donations, one-time expenditures, and your compensation. (When you provide a buyer your valuation, they may inquire about your discretionary cash flow, so be prepared to mention and value each significant spend or purchase.)

Finally, any current debts or future payments are deducted from net income, referred to as liabilities.

Learn about the concept of SDE multiples

Your SDE shows the genuine monetary value of your company, but it also values it several times based on industry standards. (If you value your company based on EBITDA, you’ll use an EBITDA multiple.) Small firms should use SDE for their business valuations more frequently because small-enterprise owners typically take a substantial percentage of their revenue for their salaries and living expenditures.

For each industry, there is a different SDE multiple. The SDE multiple for your firm will vary depending on market volatility, where it is located, its size, assets, and how much risk is involved in transferring ownership. As you can assume, the greater your SDE multiple, the more valuable your company is.

Conclusion

While selling a business in South Florida may seem like an easy feat, in the beginning, it can turn into a pretty overwhelming task. However, when you know the basic process of evaluating your business, the journey will become less difficult for you.

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