Chapter 1 — The P&L Statement
Ravi starts valuing his business. First stop: the P&L.
In his spare time, Ravi begins to think about what his cafe is actually worth. The first place to look is the Profit and Loss statement — three years of revenue, expenses and profit laid out clearly. Year 1: a loss. Year 2: losses shrinking, margins improving. Year 3: net profit of Rs.1.4 lakh.
The trend matters more than any single year. Revenue grew 133% in three years. Profit margins improved every year. The business is moving in the right direction.
Chapter 2 — The Balance Sheet
What does the cafe own, and what does it owe?
The balance sheet is a snapshot of the business on one specific day. On one side: everything owned — equipment, cash, inventory totalling Rs.7.2 lakh. On the other side: everything owed — a bank loan now reduced to Rs.1.8 lakh, supplier credit, and owner equity of Rs.5 lakh. Both sides must always balance exactly.
The bank loan is shrinking — from Rs.3 lakh originally to Rs.1.8 lakh now. Ravi has been repaying debt from the business's own cash flows. The balance sheet is getting stronger every year.
Chapter 3 — The Cash Flow Statement
Profit on paper is one thing. Cash in hand is another.
The Cash Flow Statement shows actual money moving in and out — not accounting entries. It has three sections: Operating (running the cafe day to day), Investing (buying equipment), and Financing (loans and dividends). Year 3 operating cash flow is Rs.1.9 lakh — higher than the reported profit of Rs.1.4 lakh.
Cash exceeding profit is a green flag. It means the business is collecting money faster than it is booking revenue. The profits are real, not just numbers on a page. Ravi now has a clear picture of what his business is worth on paper. But a valuation requires more than financial statements alone.
Chapter 4 — A New Ambition
Ravi has found a second location — and needs a partner.
Running the numbers on his own cafe has given Ravi a clear sense of what he has built. More importantly, he has spotted a second location in a neighbouring area — same formula, same proximity to offices and a metro station, same potential. But he cannot fund it alone. He starts thinking about bringing in an investor.
This changes everything. Ravi is not selling because he needs money or wants out. He is selling because he sees an opportunity and needs capital to grab it. He mentions it to a few regulars one morning. Word gets around.
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