Do you want to buy a business that is growing or a business that is failing? Unless you are one of those rare entrepreneurs whose acquisition strategy revolves around acquiring and turning around distressed assets, most buyers want websites that are growing. But is it really easy to tell if a website is growing or shrinking? This presentation will explain in detail how to perform a proper year over year financial analysis. Then read further for an example of how this can uncover a business that appears to be growing, but is actually slowing down.

1. HOW TO DO A
YEAR-OVER-YEAR
FINANCIAL ANALYSIS
Too many buyers acquire websites and online business’s on ‘gut feelings’.
This presentation will show just one simple tool you can use to buy
smarter.

2. What is Year over Year Analysis?
Most buyers look at
the monthly financial
trends of an online
business.
A Year over Year
analysis compares
two years with
similar months.

3. Why Do Year over Year Analysis?
• Gives a better sense of overall trends
• Neutralizes Seasonal Fluctuations
• Better identifies cause/effect of changes in
business
• Creates a better baseline growth figure for
projections

4. What Should You Analyze?
Anything can be analyzed, but revenue and cash
flow are the most common starting points.

5. What Should You Analyze?
• Gross Revenue Trends
• Owner’s Earning Trends
• Revenue to Earnings Trends
• Gross Profits
• Gross Profit Margins
• Total Expense Profile
• Trend of an individual expense
• Trend of an individual expense to revenues
• Just two years of financials
• Multiple years of financial data

6. How to Setup a YoY Analysis
You can orient your
table vertically or
horizontally. This
example will use a
vertical orientation.

7. Transpose Values Into Their Cells
This step is a bit
tedious, but
necessary.

8. Calculate the Year over Year Change
• Add a new column called “% Change”
• Make that column = (this year - last year)/last year
• Format the cells to %
• Copy this for all of the cells in that column.

9. Now You Can Visualize Data
What initially looks like a company that is growing is
obviously a company whose growth is stalling.

10. To Learn More
This presentation is part of a larger article on
how to use financial trend analysis to buy an
online business.
To see the full article, click the button below.
Read the Full Article