How to command maximum price when selling an acquisition

Let’s talk about how to properly exit a business acquisition.

Done right, this can earn you a massive payday.

But let’s clear up one thing first:

If you’re planning on acquiring a business for a “quick flip,” selling it six months later for a seven-figure profit, think again.

There are people who do that, but only for distressed businesses — and it takes years of hard work!

That said:

Whether you’ve turned around a distressed business, or acquired a stable and already-profitable business, your exit strategy will look about the same.

There are three requirements to meet if you want to sell your business for a top price:

1. Have at least three years of solid financials

Your business needs to be lendable.

(In good enough shape for the bank to be willing to lend money to your buyer.)

Many business owners like to hide their profits to avoid paying taxes, which is a big red flag for banks!

So if your accounts, balance sheets, and P&Ls (profit and loss statements) all show good growth and cash flow, BUT your tax returns show a big fat $0 in profit, then the bank will be reluctant to hand out a loan.

Make sure you’ve got at least three years of tax returns showing the exact amount of money you’re making, and that match your P&Ls.

2. Demonstrate that your business has great management in place

This increases your business’s valuation multiple.

Small businesses sell between 2X and 4X cash flow.

When the owner needs to be involved in the day-to-day, that’s of lesser value. So it’s a 2X cash flow business.

But, if you’ve removed yourself from daily operations, and have a General Manager running the business in your place with a great team under them… then you can sell your business for up to a 4X cash flow (double the price)!

3. Show that you’re invested in systems

This includes things like:

• Software (CRMs, accounting and payroll, etc.)

• Having SOPs (Standard Operating Procedures) for every aspect of the business, like great customer service processes and onboarding/training for new team members

Systems make or break a company. I’ve seen businesses sell for way more money when they have great systems in place, compared to those who don’t.

Hit all three of these points, and you can build a 4X-type business that will make you a huge return.

Buy a business for $1 million, and no joke — you could sell it for $5m to $6m three years down the line!

Interested in step-by-step guidance on how to acquire profitable businesses, or passively invest as a partner in an acquisition?

Just fill out our 2-minute Investor Survey here.

Tell us what types of deals you’re interested in, and we’ll help you get started.

And stay tuned for more acquisition tips and strategies!

P.S.

Some exciting news…

I’ve just released a FREE course on how to acquire your first business for $0!