According to Maxell Consulting , many business owners who were considering selling their business last year have decided to wait during these tough economic times.
The February 2009 edition of the Maxell Consulting value adding newsletter included an article on using gross profit to boost the value of the business. The key to getting a premium price for the business is to find the right buyer.
The newsletter article said: “If you can find a buyer for your business that will merge your business into an existing operation, the cash flow benefits that the buyer will receive will be much larger .”
This is because the buyer gets the benefit of the gross profit from the future sales, less additional fixed costs incurred after merging operations.
The key to unlocking the value of the gross profit is to find the right buyer for the business and develop a strategic relationship that demonstrates the value of the business to the buyer.
Following are the key preparation steps to boost the value of the business:
- Understanding the gross profit
- Having proper documentation
- Understanding how the cash flow can increase the value of the business