What Buyers Look For in a Business: The 5 C’s That Set Your Price

About the Episode

What buyers look for in a business comes down to one question: can they step in and run it, or are they buying a project? This episode walks through the five areas buyers check to answer that question: competitive positioning, clean and trusted financials, the cash flow cycle, concentration risk, and capabilities. You will learn what to fix in the years before a sale, why a buyer will not pay you for problems it plans to fix itself, and how slow answers during due diligence can wear a deal down.

What You’ll Learn

• Close your books every month: Enter every transaction into a structured system and book accruals and journal entries monthly rather than cleaning up at year end. Lumpy, spreadsheet-based numbers add friction to the sale, and friction can kill a deal.
• Fix your cash flow cycle yourself: Know how long your cash sits in inventory and receivables, and collect on the terms you agreed. A buyer who spots the problem may pay you a lower multiple, fix it after closing, and keep the value.
• Write down how the business runs: Document how leads become orders, how orders become cash, and how you buy and pay. If you are the only one who knows how things work, a buyer sees little they can take over and operate.
• Put key relationships on paper: Have customer and vendor contracts that set out pricing, duration, and whether they can transfer to a new owner. If half your revenue comes from one customer with no contract, expect a buyer to shift more of the price into an earnout.
• Answer data requests quickly: Be able to pull revenue by customer or product line without weeks of work. Slow, unclear answers pile up until a buyer decides the deal is too much work.

Topics Covered

Want More? Related Resources:

• Quality of Earnings in M&A: The Ultimate Guide
• Quality of Earnings in M&A Explained in 30 Minutes
• A Look Inside the Head of a Strategic Buyer
• Building a Sellable Business
• Mark Sims on LinkedIn

This episode provides general information only and does not constitute legal, tax, accounting, or other professional advice. The guest’s views are his own and do not necessarily reflect the views of Morgan & Westfield.

Meet Our Guest

Mark Sims

Managing Principal, consultMSG

Mark Sims is Managing Principal at consultMSG, a private equity advisory firm, where he leads the Technology Solutions group and helps clients execute transactions and drive business transformations. He has more than 20 years of experience leading growth and transformation for Fortune 1000 and private equity-backed companies, including serving as chief information officer and leading strategy and M&A at Scotts Miracle-Gro.

LinkedIn: https://www.linkedin.com/in/markjsims/