Physical plant

Definition

The buildings, utilities and fixed systems a business actually runs on.

Why It Matters

In a premises-heavy business it decides more deals than the profit and loss does. Roofs, paving, drainage, septic and well capacity, electrical service, life-safety systems: each one carries a permit whose transferability and current compliance are checkable facts, and each one has a replacement cost that arrives whether or not the seller ever booked it. A licensed trade compounds the problem, because the regulator inspects the building as well as the operator, so a deferred item can gate the license and not merely the budget. Price the upgrade plan before arguing the multiple.

In numbers: A park needing $250,000 of septic and pedestal work carries that bill whether or not the accounts show it, which is more than a year of net income on a small one.