• Simon Zryd

Value Driver 4: The Valuation Teeter Totter



Value Driver 4: The Valuation Teeter Totter

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Remember when you were a kid you go to the playground and you play on a teeter totter? The light kid is on and then the heavier kid gets on and the light kid goes up?

The same relationship exists between the way cash moves through your company and its value. It’s on of the 8 Value Drivers.

Essentially when a buyer comes and buys your business they've actually got to write two checks. They write a check to you the owner, that’s obvious.

But they have to write a second check. A lot of people don't really think about a second check. It is to fund your company’s working capital. That's the money your business needs to operate the day you hand over the keys to the buyer. The problem is that the buyer has to write those two checks out of the same checkbook.

The more cash your company needs to run, the more cash the company needs to operate, the less a potential buyer is going to be willing to buy your business.

The way to improve your score on the valuation teeter totter is to make sure that your business is generating cash.

If you collect receivables collect them faster. If you can, extend your payables a little bit more. Make sure you're getting to the point where you're generating more cash as a business. And that's going to prove your score on the teeter totter.

To get more in-depth information on all of these 8 value drivers, you can click the link here https://www.denverbusinesscoach.com/8vdebook and download a free eBook we put together for you.

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