The Higher the Cash Flow, The Higher the Asking Price

The asking price for a company can be determined by several factors, such as the:

• value of your assets
• value of your market reach
• value of your goodwill
• value of your location
• value of your technology

But the underlying factor that supports the asking price — regardless of the perceived market value of the business — is the sustainable cash flow that the business generates. This about it!

What the Buyer Looks At

What does the buyer need to support their decision to pay the asking price for your company? Enough cash to:

1. pay the buyer's salary
2. pay the financing costs to purchase the business
3. return a minimum investment for the down payment
4. generate working capital to grow the business

These are the minimum requirements. Thus when your business generates a higher cash flow, the higher your asking price

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