Cash Flow is the Kingpin When Selling Your Business

Think of the bottom line cash flow of your business as the first introduction to a buyer. If that bottom line is not attractive, buyers will not look. Pin your bets on improving cash flow to be a king in the marketplace.

Most small business owners spend their time trying to beat their competition by building the latest and greatest gadgets or providing the best customer service. They can become so focused in the daily details of working in the business that they lose sight of the end game. The most important thing an owner can build is value so they can one day sell the business. The more value created the more money a buyer will pay. So, how do you create that value?

Value is determined by available cash flow and the risks associated with obtaining it. Yes, the other aspects of the business such as product, service, market, and reputation matter too. But how will buyers judge those aspects? How will they ultimately gain perspective of all the virtues of the business? The main component will be how much cash flow it generates.

Not only is cash flow the best indication as to the quality of a business and its market, it is the single greatest reason that people go into business for themselves. It’s great to love what you do but if you can’t make money doing it, you can't make a living. Prospective buyers will evaluate a business for potential purchase based on the cash flow it generates, whether it be an individual looking for enough cash flow to support their lifestyle or a company looking for a strategic purchase that offers a return on their investment and growth potential.

You will be glad you pinned your bets on cash flow when it comes time to sell your business. Why? Because you will no longer be trying to beat your old competition for customers looking for the latest and greatest gadgets. You will be competing for buyers with every seller in the business-for-sale marketplace. But if you played your cards right, you will reign like a king among buyers by holding a crown jewel, a prized cash flow available for purchase.