Traits of a Good Business

Traits of a Good Business

Increasing Revenue & Cash Flow;
Business buyers today look for operations with revenue and cash flow increases of at least 5% per year for the last 3 years.

Complete Financial Documentation:
Buyers want provable cash flow; a truly marketable business will be capable of providing the following financial records for at least 4 years:
1.Federal Tax Returns.
2.Income Statements (including interims not older than 60 days)
3.Balance Sheets.
4.Sales Tax Records.
5.Payroll Records.

Continuity of Ownership:
Has the business been owned by the seller for at least 5 years?

Facility Lease/Ownership:
Buyers look for businesses with leases of at least 5-7 years remaining on a lease or the possibility of facility ownership.

Pricing, Terms & Valuation:
The most important factor in determining whether or not a business should sell. Buyers work on 2 principles; substitution and leverage. Substitution being the underlying principle of the Market Approach to valuation. "A buyer will pay no more than that which he/she would have to pay to purchase an equally desirable substitute." Leverage; a buyer's cash injection is viewed as a down-payment, not to cash out the seller. With over 2M businesses to choose from; why should a buyer pick this one? Is there a financing plan in place? Do the current earnings support debt service and provide a livable wage for the buyer? How did you determine the value? (Best answer; We had an independent valuation completed recently, worst answer; my accountant says..)

Existing Management & Personnel:
Buyers need good people with good morale to ensure continuity. Is there management experience within the staff?

The 5 Basic Questions
A good Business can answer the following questions with ease.
1. What's for sale?
2. Why's it for sale?
3. How was the price determined?
4. What financing is available?
5. What's the opportunity?






Professional Business Intermediary Services

How was value determined? This question must be asked, then answered without hesitation.



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And also...

Institute of Certified Business Counselors
Society of Business Analyst
National Association of Realtors
Colorado Association of Realtors
Durango Chamber of Commerce
Farmington NM Chamber of Commerce

Contact us at:
Po Box 755
Mancos, CO 81328
888-241-9809
970-533-7613
970-533-7670 (Fax)
Info@Powell & Associates, Inc.

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