Every business will sell – if priced correctly. The asking price is typically based on a multiple of seller discretionary cash flow (SDCF) with various factors to be considered to establish the multiple used. If you ask 100 people, everyone will have a different opinion, but the only factor that really matters is what a buyer is willing to pay, which in most cases is established by what similar businesses have sold for with the same SDCF range.
I have found from experience; the following are the top issues what the phone does not ring.
- Unclear or no financial records other than a tax return, including poor accounting practices and poorly formatted financial statements.
- Undocumented cash sales.
- Excessive personal expenses.
- A price/SDCF ratio which has nothing to do with reality.
- Declining sales, non-repeat customers, most all customers are one-up.
- Issue with business facility lease expiration date; facility has not been well-maintained; facility is messy, dirty, and/or disorganized.
- The business is the seller, no middle management, business excessively dependent on sellers. presence, no tenure of employees, or high employee turnover
- High concentration of sales in limited number of products or services, lack of diversification.
- Minimal or no repeat customers.