Sell Your Company For 10 Times Cash Flow

Guest post by: Alan George
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Franchise Your Business the right way-We Buy Houses Guy Franchise - By Alan George

Business owners many times have a misconception of what their business should be worth - They work hard, it has good cash flow, why shouldn't they be able to sell it for whatever they choose to? Businesses in the U.S. in most cases are valued at .75-1.5 times one year's worth of revenue. That's it.

3.5 net cash flow from a single year in business is another way to figure a business' value if sold based on current revenues and profitability. So if a business is generating $100k in profits, it will typically be sold for $350k in value.

Why then do franchise companies sell for 10 X EBITDA? This is a significantly higher valuation that a typical company owned business model....for example if you have a franchised business and are generating $100,000 in profit, you could sell your business for $1 million.

The reasons are simple, a Franchised business model has the following elements which create value for a buyer:

1. Scalability - the model has been proven to scale with the addition of new franchise partners in other markets.

2. Lack of dependability on the owner - the fear of buying a business is that it won't operate well without the owner in place....franchising proves that the systems and operating model don't NEED the owner to be in place. When a franchise organization is sold, the franchisees go with that transaction providing stability and operating management with "skin in the game".

3. Opportunities for Growth - Franchising creates growth channels to develop a brand, regaional or national brand and a significantly higher return on investment for the new buyer.

4. Franchising creates an exit strategy for an investor. Franchised businesses are more saleable than company owned businesses.

If you are looking for an exit strategy, a growth channel or a vehicle to build your business and brand, Franchising could be a viable alternative. Contact us to find out whether franchising makes sense for you.

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Franchise Your Business the right way-We Buy Houses Guy Franchise - By Alan George

About the Author: Alan George

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Mr. George is a specialist in franchise territory planning, franchise mapping and franchise strategic planning. Alan George has over 27 years advertising, sales and marketing experience. Most recently he held an executive position with GeoVue, a company that provides predictive analytics for franchise sales forecasting, site selection and market planning to retailers and restaurants. Prior to GeoVue, Mr. George was Director of Sales and Business Development at Tactician Corp, a franchise mapping company. At Tactician Corp, Mr. George worked extensively with retailers and restaurants providing site selection and geo-targeting tools. While at Tactician, Mr. George also worked closely with several franchise to help create territory mapping and optimizations. In his roles at Tactician and GeoVue, he worked closely with Franchise Development teams to create tools and approaches that helped his customers sell more franchises. Mr. George brings great experience in demographic analysis, understanding market potential, customer profiling, and sales territory design. Previous to his work in the franchise field, Mr. George also has a background which includes sales at the Boston Herald, where he was part of the 5th largest classified advertising sales teams in the United States. Mr. George also sits on advisory boards at local start-ups in the Boston, MA area, and is active in the entrepreneurial community in the Boston/Cambridge market. As part of that entrepreneurial spirit, he also has started his own sales consulting practice, with offers to provide sales training, recruiting, sales outsourcing, and a value proposition directed sales process implementation. His extensive network provides a vast list of sales, marketing and financing contacts http://www.franchisemarketingsystems.com/contact-about-franchising-your-business/ 781-438-0468
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