How to Sell Your Business for Top Dollar
"The reality is businesses sell based on the cash flow. Period.
Particularly post-recession, buyers want to see residual revenue, which is worth more to a buyer than a business model that is forced to consistently acquire new customers.
"The more that it costs you to acquire a customer the more valuable that customer becomes and the more important that you retain that customer for continued business. That is a significant indicator of value in the business," says Dr. Alex DeNoble, head of San Diego State University's Entrepreneurial Management Center.
DeNoble cautions that there are many questions a business owner looking to sell has to consider in attempting to mitigate the risk of eroding the value of their business. Is there the possibility that competitors can take customers away? Is the business shaped around one particular customer or employee? Is the business run on sound systems such as customer-relationship management or cash flow management systems?
Many business owners place "too much focus on the top line and not enough on what it takes to run the business properly. When there is so much of a focus on sales it can tend to take your eye off of the ball with respect to what it takes to convert the sale to profitability," Dr. DeNoble says.
Many times business owners will want to use a business-specific broker to handle the sale. The broker can help market the business and appropriately value it. Keep in mind that until a sale is complete, it's best to keep quiet. A potential sale could scare off employees, suppliers and customers.
-- Written by Laurie Kulikowski in New York.
To contact Laurie Kulikowski, send an email to: Laurie.Kulikowski@thestreet.com.
To follow Laurie Kulikowski on Twitter, go to: http://twitter.com/#!/LKulikowski
>To submit a news tip, email: firstname.lastname@example.org.