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1 Industry outlook
If the outlook for your industry is bright, the price of your business will go up.

2 Depth of management &
the sales teams
If the business owner wears all of the hats, the price goes down.

3 Customer base
If a company has limited customer concentration with no single customer representing more than 5-10% of revenue the price goes up.

4 A good story to tell
Being able to tell a good (and
truthful) company story is critical in helping the buyer recognise the full value of a business. An experienced broker will compile a good story that best showcases your business to potential buyers.

5 Stage of industry consolidation

If a company’s industry is experiencing consolidation with the big companies getting bigger through acquisition, then prices for smaller companies will rise.

6 Company track record
If a company can show a track record of consistently growing sales and profits, buyers will pay more.

7 Type of business

  • A manufacturing company with a proprietary product will sell for more than a job-shop manufacturer.
  • A distributor that adds value by offering installation, repair, and/or engineering / design input will sell for more than a non-value-added distributor.
  • A service company with a special expertise and/or on-going contract maintenance will sell for more than a similar service company without these capabilities.
8 Revenue size
The larger a company’s revenue, generally the higher the selling price. A business with $25 million of annual
sales will sell for more than a company with $5 million in sales.

9 Market position
A company that dominates its market or has a unique niche in the market will sell for a premium over other companies not dominating their markets.

10 Having multiple buyers
This is clearly one of the most important factors. When there are multiple buyers vying for a business,the price of the business will exceed the price paid for a business sold without competitive bids.
Looking for a smart business
opportunity?
  • Need to diversify or bolt on a new business division?
  • Ready for a career change or retired too early?
  • Looking for a great investment opportunity?
See the back page for a sample of excellent businesses for sale.
The real costs of buying a business

So you’re thinking of buying a business. Excellent, but make sure there is enough cash to run it, especially during those first few critical months.

The number one concern of most new business puchasers is running short of cash to meet their immediate obligations, such as rent, salaries, payroll tax and all those other expenses that are easily forgotten in the midst of the excitement of buying and running a business.

Working capital is essential to operating a successful business. There must be free- flowing cash to pay the bills.

Business owners usually do not think about the impact of working capital on the buyer of their business or more bluntly: it’s not seen as the seller’s problem. This is where a business broker can help steer the parties through uncertain waters.

Business brokers know what makes up working capital and how to advise buyers and sellers to structure deals. In the eyes of the business broker working capital is made up of:
  • Short-term cash requirements plus
  • Customer accounts receivable plus
  • Inventory less
  • Supplier accounts payable, equals
  • Total working capital
Buyers, sellers, business brokers and other professionals need to not only understand working capital, but know how to best leverage it to close more deals.

Buying and starting out in your new business should be an enjoyable challenge, not a struggle to pay the bills from day one. To ensure you don’t find yourself in such a situation be sure to get the right advice from experienced professionals who know all the problems and pitfalls. You’re welcome to call us on (02) 9922 7400.


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