Marketing 101 tells us that any successful product or service must have a real demand regardless of our personal opinions. So what will create a demand for your business?
The buyer is either looking for an acquisition that will:
- fit into his current line of products or service, or compliment their existing lines or add-on
- a platform acquisition that creates regional or national dominance and will grow through future acquisitions.
Thus, the number one priority is product demand and future growth.
Next is cash flow. The more the better. If the buyer’s synergies create the cash flow, the lower the purchase price will be. In effect, the purchase price is linear to cash flow.
If the acquisition is a platform acquisition, then the depth and breath of the management is critical to the acquisition and pricing. If the business has grown because of one or two founders who neglected to build a solid management team to succeed them, the business becomes less attractive. This applies to both an add-on and platform acquisition.
Clean is always good. To a buyer, clean means audited financial statements, absence of litigation, compliance with all regulatory agencies and knowledgeable advisors.
Today, deals are being made and multiples are very close or exceeding those of five years ago. Even if you don’t plan to sell your business for 15 or 20 years, you need to begin planning now.
For more information on S&K Transitional Services please contact info@stark-knoll.com.