Cash Flow and Price of Business Will Determine Likelihood of Sale.
Cash flow is king for buyers when looking to acquire a business, as this purchase may very likely be the most important and expensive purchase in their life. Most of the serious buyers we deal with realize this and are able to come up with the cash and/or financing required for the purchase. What many of them don’t realize is that they will need a significant amount of cash flow after the purchase to do three things; 1) to pay themselves a living wage, 2) to retire the principle and interest on any debt they incur in the purchase of the business, and finally 3) to provide them with a return on their down payment (pay themselves back) and/or to have money left over to put back into the business (working capital). So, if you are in the market to buy a business sometime in the future, please keep this in mind. On the other hand, if you are a business owner who is looking to sell sometime in the future, keep this in mind as well when it comes time to determine the sales price of your business. If the cash flow of the business can’t support the three things we mentioned above, you may want to reconsider your pricing, or be prepared to negotiate on the terms of the deal in an effort to make the deal work for a buyer.
