Buyers Want Cash Flow

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Buyers Want Cash Flow
The astute small business buyer is looking for cash flow. So, is cash flow the same thing as profit? Not usually. A buyer will look at your profit and loss statement or your tax return, and especially at the owners or family compensation. Other large one-time expenses like a new computer system, building remodeling, etc. are expenses which the new owner would not have next year, and can be adjusted for cash flow. Depreciation and amortization are non-cash expenses which would also be adjusted to arrive at the true cash flow. Further, the current owner may expense some items which the new owner may not choose to include in their operation of the business, so these would also be adjusted to show the true cash flow.

What is good advice for business owners who are considering selling their business next year? Work with your accountant to insure you have clean financial records. A new owner will want to understand your records to get a clear picture of what they are buying. These are essential to get the maximum price for your business.

A professional business broker is experienced in advising a selling client on a suggested business selling price. The business broker will also develop a confidential marketing plan to expose their client’s company to the buyers.

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