Time to Reveiw re-sized

So your business is for sale, and nothing has happened. Why?

Price!!!

Every business will sell – if priced correctly. Usually, the price is based on a multiple of seller discretionary cash flow (SDCF) and there are various factors you can use to establish the multiple. If you ask 100 people, every one will have a different opinion, but the only factor that really matters is what a buyer is willing to pay.

On the upside, the higher the SDCF and of the fewer negatives (listed below), the higher the multiple.

On the downside, the discounts or negatives a buyer will apply to the price are:

  • Unclear financial records, including poor accounting practices and poorly formatted financial statements
  • Undocumented cash
  • Excessive personal expenses
  • Declining sales
  • Poor industry outlook or outdated business model
  • Accounts receivables with accounts over 45 days (no accounts receivables or prepaid is the best)
  • No plan for what is needed to take the business to the next level
  • Customers representing more than 10% of total sales (how many, how much over 10% will determine the amount of the discount)
  • Issue with business facility lease; facility has not been well-maintained; facility is messy, dirty, and/or disorganized
  • Major investment required to update equipment or remodel the facility
  • The business is the seller, no middle management, business excessively dependent on seller’s presence, no tenure of employees, or high employee turnover
  • High concentration of sales in limited number of products or services, lack of diversification
  • Minimal repeat customers, whether selling a consumable, and length of sale cycle to reorder
  • No written business procedures, policies to help transition to the buyer
  • Incomplete “package” of business records for potential review (needs basic information such as month-by-month sales for prior three years, federal tax returns, and year-end financial statements; list of business assets being sold as part of the business, with model numbers and approximate FMV, copies of any distributor or franchise agreements – all should be available for immediate downloading from a virtual data room when appropriate)
  • Whether inquiries responded to immediately

If you would like a confidential, no-obligation analysis and discussion of what you can be doing now to prepare for when you are ready to put your business on the market, please call (888-893-6661) or e-mail ([email protected]). I serve customers nationwide. To learn more about my background and see customer recommendations, visit my LinkedIn profile at http://www.linkedin.com/in/dolansales.

© 2013 Dolan Sales, Inc.