--- title: "How do you read a website seller's profit and loss statement before buying?" url: https://firstpassmemo.com/answers/how-to-read-a-website-sellers-profit-and-loss-statement/ updated: 2026-10-29 publisher: FirstPass Memo (hello@firstpassmemo.com) --- Answers # How do you read a website seller's profit and loss statement before buying? Short answer: Ask for a month-by-month profit and loss statement for at least 12 months. Tie revenue to the processor or ad network and costs to bank statements. Add back only verified one-off and owner costs, add missing ones such as the owner's time, and value the business on the restated profit. Updated 29 October 2026 · Figures checked against their sources on 29 October 2026 · By Joan Murphy (https://firstpassmemo.com/about/joan-murphy/) (pen name) · How we check (https://firstpassmemo.com/methodology/) · Corrections (https://firstpassmemo.com/editorial-policy/) ## Check a listing now, free FirstPass Memo offers a free red-flag checker for business-for-sale listings and a $79 first-pass memo on a specific listing you send, paid after delivery. Paste any listing below for payback, the asking multiple and its red flags. Nothing you paste leaves your browser. Open the full checker (https://firstpassmemo.com/checker/) to unlock every flag with its seller question. Only know the price and monthly profit? Put them in the link and the check runs on its own: firstpassmemo.com/checker/?ask=45000&profit=1500 (https://firstpassmemo.com/checker/?ask=45000&profit=1500&via=box). ## What should the profit and loss statement show? A profit and loss statement (P&L) lists revenue and costs for each month. For a small online business it should show revenue by source (sales, ads, affiliate, subscriptions), the cost of goods or fees that scale with sales, operating costs such as hosting, software, writers and contractors, and the profit left over. Ask for it month by month for at least the last 12 months, ideally 24, not as one annual total. Many listings show a single averaged profit figure, and that is where problems hide. ## How do you tie it to the records? - Revenue. Match each month to the payment processor, marketplace or ad network dashboards. Gaps of more than a few percent need an explanation; see how to tell if listing revenue is fake (https://firstpassmemo.com/answers/how-to-tell-if-a-website-listings-revenue-is-fake/). - Refunds and fees. Check that revenue is net of refunds, chargebacks and platform fees, or that those appear as costs. - Costs. Match the main costs to bank or card statements. Look for software, freelancers and ads paid from a personal card and left off the P&L. - Timing. Annual plans and annual software bills should be spread across the months they cover, not booked in one month. ## Which costs are often missing? - The owner's time. If the owner writes, does support or runs ads, a new owner will either do that work or pay someone; see owner hours not stated (https://firstpassmemo.com/flags/owner-hours-not-stated/). - Software on a free or legacy plan that will reprice for a new account. - Content, links or ads paid for in an earlier period that are still driving revenue now. - Inventory, shipping and customs for stores, when the P&L uses cash paid rather than cost of goods sold. - Taxes and accounting, which matter even when they are excluded from the profit figure. The hidden costs (https://firstpassmemo.com/answers/hidden-costs-of-buying-a-website/) answer covers the costs that start after you buy. ## What are the red flags? - A margin far above similar businesses, which usually means costs are missing; see very high margin (https://firstpassmemo.com/flags/very-high-margin/). - Add-backs that are large or recurring, such as "one-off" content spend every quarter; see add-backs (https://firstpassmemo.com/answers/add-backs-when-buying-a-website/). - Monthly figures that do not add up to the annual total in the listing. - Costs that fall sharply in the months before the sale while revenue holds, which can mean spending was paused to lift profit. - A spreadsheet only, with no access to the processor, ad network or bank records behind it. ## What does a composite check look like? This is a composite example, not a real deal. A small SaaS lists $5,000 a month in profit, asking $150,000. The month-by-month P&L ties to Stripe for revenue, but the bank statements show $300 a month of software paid from the owner's personal card and not on the P&L, and the owner does about 10 hours a week of support. The buyer adds the software back as a cost and prices the support at $1,000 a month for a contractor, restating profit at about $3,700 a month. At the same multiple that is about $110,000, which becomes the buyer's offer. Run the listing through the free red-flag checker (https://firstpassmemo.com/checker/) first, then compare the restated profit with SDE vs net profit (https://firstpassmemo.com/answers/sde-vs-net-profit-for-valuing-an-online-business/) before you value it. ## Frequently asked questions ### Is a spreadsheet P&L good enough? As a starting point, yes. Most small online businesses do not have accountant-prepared statements. What makes it reliable is tying each line to the processor, ad network and bank records, not who prepared it. ### How many months should I ask for? At least 12, month by month, and 24 if the business has them. Two years show seasonality and whether the last few months are typical. ### Should the owner's salary be on the P&L? Often it is not, and profit is reported before paying the owner. That is fine as long as you know it. Price the owner's work at what it would cost to replace if you will not do it yourself. This is not accounting or tax advice. ## Sources - FirstPass Memo, red-flag checker rules (https://firstpassmemo.com/flags/), our own rules, published as /rules.json - FirstPass Memo, seller question bank, October 2026 (general checklist) (https://firstpassmemo.com/get/seller-questions-general), our own questions - FirstPass Memo, free buyer calculators (https://firstpassmemo.com/tools/), our own calculators; the formulas are on each page ## Related - Free red-flag checker (https://firstpassmemo.com/checker/) - Add-backs when buying a website (https://firstpassmemo.com/answers/add-backs-when-buying-a-website/) - SDE vs net profit (https://firstpassmemo.com/answers/sde-vs-net-profit-for-valuing-an-online-business/) - Hidden costs of buying a website (https://firstpassmemo.com/answers/hidden-costs-of-buying-a-website/) - How to tell if listing revenue is fake (https://firstpassmemo.com/answers/how-to-tell-if-a-website-listings-revenue-is-fake/) - How to value a website (https://firstpassmemo.com/answers/how-to-value-a-website/) - Red flag: very high margin (https://firstpassmemo.com/flags/very-high-margin/) - Red flag: owner hours not stated (https://firstpassmemo.com/flags/owner-hours-not-stated/) - Glossary of listing terms (https://firstpassmemo.com/glossary/) - More questions buyers ask (https://firstpassmemo.com/answers/) Composite examples are invented and labelled. Figures from other sites are quoted with a link and the date we read them; FirstPass figures are asking prices and seller-stated profit, not sale prices. Informational screening only, not investment, legal or tax advice. ## Looking at a specific listing? Get a full memo — $79, pay after delivery. Paste the link; your memo arrives within 24 hours (Mon–Fri). $79, pay after delivery: we send the memo first, then a payment link. Human quick reviews cost $199–$390. --- FirstPass Memo is informational screening, not investment, legal, tax, accounting or valuation advice, and not an audit. Seller figures are not independently verified. HTML version: https://firstpassmemo.com/answers/how-to-read-a-website-sellers-profit-and-loss-statement/