Calculate owner-adjusted profit
See this course’s project requirements
A fictional purchase due-diligence file with disclosure questions, normalized earnings, owner labor, recurring fees, financing stress and a proceed/revise/stop decision.
Keep your working files in your own notebook or software. Save a private description, checklist, and work link in My Proof.
What to include
- An acquisition-scope and price-component exception file.
- A claim-definition, sample and selection-audit worksheet.
- A reported-to-normalized-to-owner-adjusted profit bridge.
- A recurring-fee and contract-control reconciliation.
- An operating-to-cash coverage bridge and downside financing stress.
- A conditional acquisition due-diligence brief with decision gates.
Review and revise
Use these criteria to check your work and choose what to improve.
- Scope: price/rights gaps are explicit.
- Claims: sample/owner labor/normalization are checked.
- Finance: fees and debt/reserve/downside bridges reconcile.
- Decision: supported conditions and qualified review remain visible.
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The idea in everyday life
Original fictional practice. All money is USD. No account, payment, personal record or outside participation is required. Fictional Atlas Desk franchise proposal: price 60,000 buys listed physical assets 20,000, inventory 5,000 and 25,000 goodwill; initial franchise fee 10,000 is additional. Local lease/brand rights/customer data transfers need separate approval not assumed. Earned annual sales 200,000, reported expenses 140,000 including variable 80,000, recurring fixed 56,000 and documented one-off repair 4,000. Seller’s claimed profit 60,000 excludes unpaid owner 2,000 hours/year; practice replacement labor 15/hour. Prospective contract royalty 6% gross sales plus adfund 2%, neither included in seller expenses. Annual debt repayment 15,000 and maintenance capital reserve 3,000. Downside 20% less sales, variable cost 40% of sales, fixed 56,000 and owner labor 30,000 unchanged. Comparable earnings sample ten open outlets: k USD -12,0,5,8,15,18,20,22,28,50; two closed outlets omitted, and their results unknown.
An owner working free can make reported profits misleading for another operator.
Calculate owner-adjusted profit — complete worked case
An owner working free can make reported profits misleading for another operator.
Fictional Atlas Desk franchise proposal: price 60,000 buys listed physical assets 20,000, inventory 5,000 and 25,000 goodwill; initial franchise fee 10,000 is additional. Local lease/brand rights/customer data transfers need separate approval not assumed. Earned annual sales 200,000, reported expenses 140,000 including variable 80,000, recurring fixed 56,000 and documented one-off repair 4,000. Seller’s claimed profit 60,000 excludes unpaid owner 2,000 hours/year; practice replacement labor 15/hour. Prospective contract royalty 6% gross sales plus adfund 2%, neither included in seller expenses. Annual debt repayment 15,000 and maintenance capital reserve 3,000. Downside 20% less sales, variable cost 40% of sales, fixed 56,000 and owner labor 30,000 unchanged. Comparable earnings sample ten open outlets: k USD -12,0,5,8,15,18,20,22,28,50; two closed outlets omitted, and their results unknown.
Earnings reconciliation
Paste at A1.
| AItem | BAmount | CStatus |
|---|---|---|
| Revenue | 200000 | Seller record |
| Variable | 80000 | 40% case share |
| Recurring fixed | 56000 | Before unpaid owner |
| One-off repair | 4000 | Documented addback case |
| Owner labor | 30000 | 2,000 h×15 |
| Royalty/adfund | 16000 | New 8% gross |
| Debt/reserve | 18000 | Cash stress |
Copy as plain text
1. 3.1 Calculate
Reconcile claimed 60,000 to revenue/expense inputs.
You should see: The claim has sourced arithmetic.
2. 3.2 Calculate
Separately support one-off 4,000 and normalize only that case cost.
You should see: 64,000 before owner labor.
3. 3.3 Calculate
Price replacement 2,000 hours at 15 and deduct 30,000.
You should see: Owner-adjusted 34,000 before fees.
4. 3.4 Calculate
Change owner hours 2,400 with rate 15; deduct 36,000 to give 28,000 before fees.
You should see: The labor assumption has visible effect.
What to finish
A reported-to-normalized-to-owner-adjusted profit bridge.
Watch for this
Treating owner labour as passive free income or adding back unsupported recurring costs.
How can I tell I understand it?
Verify that your completed reported-to-normalized-to-owner-adjusted profit bridge meets the three lesson-specific checks and retains the supporting original records.
Quick knowledge check
Answer all 3 questions. Get at least 2 right and the lesson completes automatically.
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Answer all 3 questions above and get at least 2 right. You can review the explanations and try again.
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Sources and further reading
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Source & access notes · checked 2026-10-01
Read actual redirected acquisition section on differing rights/control, full landscape and due diligence. Course uses current FTC terminology FDD rather than older source UFOC terminology.
Access: Public primary page body opened and relevant sections read through the web reader on 2026-10-01; no account required for reading.
Reuse: Original Life Starter cases, datasets and questions; no source exercise or worked dataset reproduced. Links support further reading.
Source & access notes · checked 2026-10-01
Read owner effort, contractual control and no guaranteed success; not a recommendation to invest.
Access: Public primary page body opened and relevant sections read through the web reader on 2026-10-01; no account required for reading.
Reuse: Original Life Starter cases, datasets and questions; no source exercise or worked dataset reproduced. Links support further reading.
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