Posted 07-31-2008 12:05 pm by
How much can your business sell for in today’s market? Your cash flow is key.
While the location of your business, its history, the value of your assets, and a myriad of other factors can play into the value of your business, ultimately the buyer has to answer this question: “Does this business generate enough money to cover my mortgage payments?”
In other words, the cash flow of your business is the most important factor in determining value for your business. Selling a business is very different from selling a house. In a residential housing sale, the buyers care deeply about how they feel when they live there. If they fall in love with the house, they may let their emotions take over and do whatever it takes to purchase the house. Business buyers, however, are generally not emotional. They look at the numbers, and if the numbers do not make sense, they pass.
People don’t buy businesses for the fun of it; they buy a business in order to make money. Therefore, business buyers care the most about how much money they are going to make. How much does your business cash flow? It doesn’t matter if your sales are $3 million a year. It doesn’t matter if your equipments are worth over $2 million. If your business only cash flows $30,000 a year despite having high revenues or a lot of equipment, buyers are going to be reluctant to pay a great deal for your business. Liquidating your assets may be the best option in this case.
---Written by Oliver Wu
Oliver Wu | Advantage Commercial Brokers
The Commercial Broker for
Small Business Owners in Puget Sound
Direct: (425) 785-6608
Office: (425) 651-4242 ext. 103
Fax: (425) 882-2547
E-mail: oliver@acbrokersinc.com
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