Articles

The most important and fundamental thing you can do to increase the purchase price of your company is to increase the sustainable cash flow or Seller’s Discretionary Earnings (click here). After that there a number of things that you can do: the self-serving answer is to make sure you hire a professional business broker or M&A advisor to manage and run a transaction process that reaches out to a broad base of potential buyers (there are actually some statistics that back this – click here for a study by the University of Alabama). Others include: pricing the company correctly from the beginning and being able to substantiate your price; having clean books and records (the fewer personal add backs and the fewer explanations, the easier it is for the buyer to give credit for the cash flow – and the more your price will increase relative to minor tax savings); preparing for due diligence so that there aren’t any surprises; and finally, being reasonable about the inevitable renegotiations following due diligence and realizing that the terms and structure of the transaction are often as important as the price.

Next Week: “How should I pick an attorney to help with my transaction?”