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. 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.

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The following are traits of a willing buyer:

* The desire to buy a business
* The need and urgency to buy a business
* The financial resources
* The ability to make his or her own decisions
* Reasonable expectations of what business ownership can do for him/her

How long does it take to sell my business?
It generally takes, on average, between five to eight months to sell most businesses. Some businesses will take longer to sell, while others will sell in a shorter period of time. In the prevailing business climate it may take a little longer and financing may be a little harder. The sooner you have all the information needed to begin the marketing process, the shorter the time period should be. It is also important that the business be priced properly right from the start. Some sellers, operating under the premise that they can always come down in price, overprice their business. This theory often "backfires" because buyers often will refuse to look at an overpriced business. It has been shown that the amount of the down payment may be the key ingredient to a quick sale. The lower the down payment, generally 40 percent of the asking price or less, the shorter the time to a successful sale. A reasonable down payment also tells a potential buyer that the seller has confidence in the business's ability to make the payments

Here are some questions that you might be asked and, should be prepared to answer:

* How much money is required to buy the business?
* What is the annual increase in sales?
* How much is the inventory?
* What is the debt?
* Will the seller train and stay on for a while?
* What makes the business different/special/unique?
* What further defines the product or service? Bid work? Repeat business?
* What can be done to grow the business?
* What can the buyer do to add value?
* What is the profit picture in bad times as well as good?

Why is seller financing so important to the sale of my business?
Surveys have shown that a seller, who asks for all cash, receives on average only 70 percent of their asking price, while sellers who accept terms receive on average 86 percent of their asking price. That's a difference of 16 percent! In many cases, businesses that are listed for all cash just don't sell. With reasonable terms, however, the chances of selling increase dramatically and the time period from listing to sale greatly decreases. Most sellers are unaware of how much interest they can receive by financing the sale of their business. In some cases it can greatly increase the amount received. And, again, it tells the buyer that the seller has enough confidence that the business can, indeed, pay for itself.

You might want to check the following to see if any of them are applicable:

* Keep normal operating hours. There may be a tendency to "let down" when you put your business up for sale. However, it's important that prospective buyers see your business at its best.
* Repair signs, replace outside lights, etc. You don't want your business to look neglected.
* Maintain inventory at a constant level.
* Remove items that are not included in the sale and unnecessary items, especially if inoperative.
* Repair non-operating equipment or remove it if you are not using it.
* Tidy-up outside premises.
* Spruce-up the inside of the business.