I like numbers and stats. I enjoy analyzing earning trends, comparing price multiples, and studying buyer cash flow analyses. To most people, that doesn’t sound exciting, but it can be a beautiful thing to paint a picture of a successful business with numbers. It is critical that a business for sale is priced where it makes sense for the buyer to purchase it. For buyers to make an offer, the business must have sufficient earnings to support three things:
- For owner-operators, disposable cash flow to support the buyer’s families with an acceptable standard of living.
- Loan payments for business loans that are needed to purchase the business.
- Eventually provide for a return on the initial and ongoing investments into the business for the risks taken. (This may take some time)
Financial documentation is Essential but Insufficient
The above stats and a myriad of other financial performance parameters are essential, for a buyer to determine to buy your business. However, those business stats alone are insufficient to sell your business. If your business doesn’t have a story to go with the numbers, you will probably feel like the proverbial Maytag repair man, waiting for buyer offers that just don’t come. Without the story, buyers rarely need your business.
Every buying decision is driven by emotion. That is really hard for an analyzer like me to accept. I’d like to think I only make decisions based on cold, hard, economic facts, but sales and marketing phycologists say that buying decisions start with emotion and then logic and facts are used to justify that decision.
Think about your past year. Do you remember the numbers and stats, or do you remember the stories that created those stats? Almost everyone remembers the stories and almost no-one remembers the numbers. Without the story of why the Buyer needs your business, the numbers aren’t that motivating.
The story is crucial. What’s yours?