It is smart to establish sooner rather than later what provides value for a buyer of your business. You may get a rude awaking by wait until you are ready to sell to find out your business is not what you thought. Higher value means you a higher price for your business. This information comes from over 45-years of selling businesses.
- Increasing sales and cash flow, with a 20% or higher owner benefit is the most appealing.
- Credible financial information/records and full disclosure of all known factors that contribute to the value of the business
- Repeating customers, customer diversity, limited customer concentration.
- Employees: Ideally, almost all customer contact is with employees, not the owner, low turnover, tenure.
- Growth potential, ability to scale-up
- Machinery, tools and the facility, well maintained, clean and good working condition.
- High barriers to competitive entry are
- A low amount of money tied up in inventory. Inventory needed to run the business is typically considered as part of the purchase price, which will lower the multiple of earnings.