You, the business owner, are a risk taker that is accustomed to getting things done onRead Further
Buyers buy cash flow.
It is that simple. Buyers buy cash flow with the belief they will be able to improve that cash flow in the future.
Cash flow affects valuation multiples. The greater the opportunity an investor sees to grow a business, the larger the valuation multiple.
Cash flow influences the due diligence. Fear of a cash flow downturn is why buyers dig through all your records, review your employees and evaluate your customers. To soothe those anxieties, the buyer will have you sign a list of representations and warranties in the final purchase agreement.
Cash flow focuses M&A Advisers on the Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) or Sellers Discretionary Earnings (SDE). Those two numbers are the purest approximations of cash flow in the business world
It does not matter the type, buyers buy companies with the hope of cash flow growth and the fear of cash flow evaporation. An individual will buy a business to provide them a salary and pay back the acquisition loan. A family office or private equity group will buy a business to pay back the acquisition loan, streamline operations, grow market share and sell for astronomical gains in the future. A strategic buyer will buy into a product or geographic market to acquire new customers, bring a product to market more quickly or leverage revenue into their existing operation.
Look at every little detail of your business through the lens of a buyer. Have you built a business that is strong enough to succeed as you step away? Have you built a business that can grow on the back of new energy and new ideas?
The more times you can answer that question yes, the more likely you will be to execute a successful sell of your business.
Prior to purchasing IBEX, Chuck Harvey spent 35 years as CEO, CFO and consultant to the Fortune 500, Middle Market, Mainstreet and in the Start-up community, including spending time at PepsiCo & Price Waterhouse Coopers. During that time, Chuck oversaw three dozen buy-side / sell-side transactions on three continents, including a $35M sale of a Texas digital photography pioneer to a $1 Billion Japanese conglomerate.
“Texas Real Estate Commission Information About Brokerage Service”,
“Texas Real Estate Commission Consumer Protection Notice.”