Tip #95 Does the business generate enough cash flow to justify the price?

selling a business cartoonDoes the business generate enough cash flow to justify the price?

Buyers will make an acquisition of a business only when it makes financial sense (unless there is a special attraction unique to the buyer). There are a few ways to make that justification, but in general terms, the acid test is to compute the cash flow to cover debt service (bank or sellers), a salary to the new owner and return on investment. A professional adviser can be helpful in determining cash flow and how to justify the price of a business.