2023 is officially in full swing and with it comes another round of birthdays, anniversaries, and milestone achievements. Gift giving is an integral part of any celebration, but why not reward yourself for a change? Buying a business is incredibly rewarding and cashflow is the gift that truly keeps on giving!
Cashflow is defined as the movement of funds both into and out of a business over time. Positive cashflow then, means that more money is coming into a business, e.g., revenue from sales & profits. On the other hand, negative cashflow means more money is going out, such as operating costs, rent and wages/salaries, etc. Essentially, cashflow is the lifeblood of any business.
Buying a business provides you with a lot more security and confidence than starting one from scratch does. A huge reason is because the earnings of a business will be completely transparent to you as a prospective buyer. You will be able to see the exact profits a business has been generating over the years, as well as its expenses. Having a birds-eye view over a business’s cashflow is an invaluable advantage when it comes to deciding what business to buy.
For business owners, cashflow is a tool that can be utilised to steer the business and make significant changes that benefit you. For example, positive cashflow may enable you to implement new customer payment terms, like asking customers to pay before getting the goods rather than at the point of sale. Ultimately, this will free up the availability of cash which can function as a huge advantage for a business.
However, strong cashflow is not always the biggest indicator of a business’s health. When looking at a business, an important aspect to consider is whether a large amount of your potential new business is tied to the current owner. A huge positive of purchasing a business through LINK is that our brokers encourage vendors to make themselves obsolete before bringing their business to market. For buyers, this reassures that they’re stepping into an opportunity with the pieces in place to achieve success!
It’s important to recognise that negative cashflow does not automatically make a business undesirable. Motivated buyers will see it as an opportunity to financially engineer the business towards a direction where it’s generating a surplus. Cashflow forecasting is an incredibly useful tool that can provide realistic clarity for the future of your business.
Cash is king and that’s no truer than for a business owner! It’s time to give yourself the gift of cashflow, you deserve it! Reach out to our experienced brokers to see what business acquisitions are available to you.
