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Why Accurate Valuation is Essential

Buyers Focus On Cash Flow Buyers are more interested in earnings and cash flow when buying a business. They want to know that your business…

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Buyers Focus On Cash Flow

Buyers are more interested in earnings and cash flow when buying a business. They want to know that your business will give them a steady stream of income. Some buyers will focus on your cash flow statement, while others will look at your income statement in examining your earnings before interest and taxes. Still, others will focus more on earnings before interest, taxes, and depreciation.

Whichever the case, you should be able to prove the size and the flow of income, by providing at least three years’ of audited financial records.

Buyers Will Need to See Documented Business Assets and Financials

Potential buyers will demand to see the documents available for your business. They’d want to see what documentation says about due diligence, as you’re going on with negotiations. Having documentation such as production reports, sales reports, job descriptions, employee organization charts, and operation manuals will say a lot about your business and also increase buyers’ satisfaction with the level of your managerial style.

Credibility

Generally, business appraisers are certified public accountants who are trained and experienced in business appraisal strategies. In their profession, they have established several ways to quantify the various aspects of businesses and come with an overall figure.

As part of thevaluation process, they will give you a written report which explains how they got the final value. And because an outside professional prepares this document, it will make your asking price more credible as the buyer can see how you arrived at your final price.

Remember, if you are selling a larger company, you might deal with MBAs who usually requires a sophisticated financial analysis. A detailed appraisal will make MBAs comfortable going through with the sale and will be pleased with your managerial abilities.

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