A Few Things to Consider?

Buyers Want Cash Flow

The first thing to keep in mind is that the vast majority of buyers want to buy cash flow. Sit down with your accountant or bookkeeper and begin to get your financial statements in order, with cash flow the order of business. Cash flow is not the same thing as profit. Most buyers look at the profit and loss statement or tax return, as well as owner or family compensation.

They will consider any excess compensation to employees and family. Buyers will also look at large, one-time expenses such as a new computer system or remodeling. They will consider non-cash items like depreciation and amortization. Interest expenses will be reviewed, as will owner prerequisites. These are items that a professional business broker considers when advising a selling client on a selling price.

Broker's Advice

What about the Internet? Use of the Internet continues to grow at an explosive rate - and if a virtual storefront is appropriate for your business, then developing a website is important not only to your on-going business, but also to a buyer.

Appearances Count

The time to replace that old worn-out piece of equipment is before you decide to sell. Don't assume that a new owner will want to do it or that the price will be slightly lower because you haven't replaced it. The time to "spruce-up" the business is now, even if your not quite ready to sell. Fix the sign, replace the carpet, paint the place - make it look good. It's just plain good for business, and you never know when the time to sell occurs. Keep-in-mind that anything that increases sales also increases profits and the all-important cash flow!

Everything Has Value

There are other things that add value to your business. Don't discount the value of customer lists, proprietary products and/or techniques, well-maintained equipment, secret recipes, customized software programs, or good employees. These are termed "off-balance sheet items," and although not used in most pricing models, they add to the attractiveness of the deal. Look at your business very carefully so you don't overlook those items that give your business more value to the buyer.

Eliminate the Surprises

Long before you put your business on the market eliminate the surprises! Review every facet of the business and remedy any problems that could appear during the sale process. No one likes surprises - most of all a cautious potential buyer. Whether legal, accounting, environmental, or anything else - solve it now.

Broker's Advice

If you don't have an operations manual for your business now is definitely the time to consider creating one. A manual can be a valuable asset to a new owner and can create value. Even if it doesn't, it will impress buyers that you have your business "act" together and should help you sell more quickly and effectively. It doesn't have to be elaborate, just cover the basics. A collection of ads that you have placed in a catalog or sample of products, publications, or menus (if the business is food related) is also impressive. Include anything to do with the business that might be helpful . However, don't include anything that is proprietary, such as customer lists, suppliers, secret recipes, etc.