Financial Issues that Make Buyers Walk Away and How You Can Fix Them

About the Episode

Ever wondered what a buyer is really thinking when they evaluate your business? This episode takes you behind the scenes with a CEO who’s acquired 11 businesses. You’ll learn what makes a company more valuable, the financial red flags buyers watch for, and how to prepare your business to attract the right buyer and close the deal.

Ideally, an owner should be able to walk away from your company for a year and know that your company will continue operating. Your company will be far more valuable if that’s the case.

Kristi Herold

What You’ll Learn

• Your business is more valuable if it can run without you: Buyers look for businesses with strong systems and processes that don’t depend on the owner’s day-to-day involvement. If your company can operate successfully while you’re on vacation for a year, it’s a huge value driver and makes the business a more attractive acquisition target.
• Don’t wait to improve your systems and accounting: Most buyers look for businesses with accrual-based accounting and well-documented financial systems. If you’re thinking about selling in a couple of years, explore what it would take to convert to an accrual-based system now.
• Make sure your cash flow is reliable: If your business relies on upfront payments, like many service-based businesses, be careful not to spend that money before it’s earned. If you do, buyers will adjust the purchase price to account for this discrepancy. Clean financial statements show financial discipline and make your business more valuable.
• Prepare to let go of your “baby”: Most buyers will not ask the founder to stay on after the sale, and in most cases, they will replace you. Buyers often absorb your team and management responsibilities into their own central operations, so you must be prepared for a clean break after a short transition period.
• Culture and fit matter more than you think: Buyers aren’t just buying your business; they’re buying your team and your culture. The culture of your business and your team’s willingness to integrate are important factors in a successful acquisition.

Topics Covered

Want More? Related Resources:

• Do Buyers of Businesses Pay for Potential?
• Preparing Financial Statements When Selling a Business
• Adjusting Financial Statements: A Complete Guide

Meet Our Guest

Kristi Herold

CEO of JAM | Toronto, Ontario

Kristi is the founder and CEO of JAM a multi-million-dollar global business that has connected millions of people through play since its inception – one of the largest adult recreational sports leagues in the world. As well she founded Keep Playing Kids, a not-for profit organization, helping vulnerable children learn life skills through play.

LinkedIn: https://www.linkedin.com/in/kristi-herold/