How do you do a valuation when the owner’s income is mixed with expenses?

“We own the company, we also manage it.
So sometimes we get paid via dividends… sometimes via expenses.”

When valuing family businesses, this is actually very common.

Owner compensation is often mixed into:

• Selling & admin expenses
• Other expenses
• Or even dividends

So the financial statements don’t always show the real operating cost of the business.

As a consultant, what we usually do is ask the company to adjust the financials.

For example:
If an expense was recorded as a selling expense but is actually owner compensation, we reclassify it properly in the P&L.

Yes —
👉 Net income may go down after the adjustment.

But that’s the whole point of valuation.
The business needs to be fully understood, not just made to “look good”.

Even when expenses (and sometimes revenue) are mixed up, we can usually adjust the numbers so the valuation can move forward.

And going forward —
they should be recorded correctly.

#ORNA #Investment #DCF #BusinessValuation