Do you have a great start up business idea or run an established business which needs a capital injection in order to grow?

Well the good news is that there are plenty of options for raising capital or achieving a partial or full sell down of equity.

At a high level we have grouped the major funding or exit strategies into several main categories as depicted below.

Without discussing each of these strategies individually (which is way beyond the scope of this article) it is important to recognise that each strategy is best employed for particular situations and at differing stages of the business life-cycle.

Secondly, it is important to recognise that each funding or exit strategy has its own unique accompanying risks and benefits as well as associated costs.

Thirdly, the chosen funding or exit strategy must align with the overall strategic objectives of the business or the exiting owner. For example, you may not want to give away equity during the early growth phase where debt funding was immediately available and easily serviced. Alternatively you may decide that accessing seed capital to fund your start up enables your business idea to be first to market and therefore your preferred funding strategy.

Most importantly - BE INVESTOR READY.

Accessing capital via any one of the above strategies requires the business to be investment ready. Banks, good friends, angel investors or strategic buyers will not invest into or acquire your business without them firstly being convinced that:

A - They are not paying too much for the opportunity;

B - They will get their money back one day; and

C - They will get a return on their investment;

BSP Strategic assist small business owners to access capital through many of the above funding and exit strategies and specialise in assisting business owners to maximise value, become investor ready and pitch for the funds.

Please contact Haydn Erbs to discuss your options further.

Recent changes to Australian crowdfunding legislation now enable private companies to raise funds from thousands of investors in return for equity in the business.

On 21st September 2018 the Corporations Amendment (Crowd-sourced Funding for Proprietary Companies) Bill 2018 received Royal Assent heralding the commencement of a new era of capital raising for Australian private companies.

Crowd Sourced Funding (“CSF”) is better known as equity crowdfunding which is the online offer of securities for investment by the public. As equity crowdfunding involves investment into the equity securities of a commercial enterprise, it is subject to Australian financial regulation.

The very recent amendments to Act now mean that much of the historical red tape, compliance costs and disclosure requirements associated with retail sourced capital raising has effectively been overcome.

Recent changes to CSF legislation include

Proprietary companies are now able to use the CSF regimeCSF shareholders will not count towards the 50 non-employee shareholder cap for proprietary companiesProprietary companies with CSF shareholders must have a minimum of two directorsCompanies will need to maintain information about CSF shareholders on their registersProprietary companies using CSF will have additional financial reporting obligationsNo audit requirement for small proprietary companies using CSF until more than $3 million is raised through CSF.Proprietary companies using CSF will be subject to restrictions on related party transactionsProprietary companies that have CSF shareholders will be exempt from takeovers rules

Remove the corporate governance concessions for public companies using the CSF regimeProprietary companies with CSF shareholders cannot be listed on overseas exchanges

What it all means

Following introduction of the new CSF legislation, private companies are now able to attract millions of dollars of seed and growth capital from thousands of retail and professional investors simply by promoting their unique business opportunity on one of the ASIC licenced equity Crowdfunding Platforms.

The CSF legislation allows small companies to raise up to $5,000,000 per annum from investors, including retail investors but on the basis that (for safety) each retail investor will be limited to a maximum of $10,000 for each company in which they invest in any 12 month period (although they may invest in more than one such company).

The Australian CSF market is still in its infancy however several early players have already established compliant platforms and online tools designed to streamline the equity crowdfunding process. (eg Equitise, Billfolda)

Most of the licenced platforms provide a suite of services to facilitate efficient investment directly into innovative companies and in doing so provide a vital link to growth capital for private companies.

Getting Started

In order to raise funds via CSF the business must firstly meet the eligibility criteria as prescribed by legislation. The next hurdle is acceptance of your offer by one of the ASIC licenced equity crowdfunding platforms.

CSF platforms charge varying fees for the promotion of the offer with most charging a cash fee of between 5% - 10% of the value of equity raised whilst other CSF platforms charge their fees in equity.

As most CSF platforms invest alongside of other investors (or are remunerated through equity) they are typically highly critical of the businesses that they choose to promote. Clear preferences are given to those businesses who can demonstrate the following:

Significant scale up potentialProven market with some tractionExperienced presentable founders supported by teamOther investors already on board.A well-developed business plan.Clear offer document.

If you are interested in raising funds for your business via CSF or more traditional Venture Capital pathways, please get in touch haydn@bspstrategic.com.au or 07 5536 7618

When the GFC hit ten years ago and global markets tanked, many people lost a huge chunk of their retirement savings. Corporate valuations halved, profits slumped, banks tightened their lending requirements and liquidity dried up overnight.

Many business owners who were eyeing an exit simply could no longer afford to retire and were then unlikely to realise the kind of gains required to fund their retirement from the sale of their business. Many simply had no choice but to keep working and hope for better times ahead.

Now wind the clock forward 10 years to the present day and the sun is shining once again.

At a high level when we look at the market we see that global corporate valuations have now returned to the pre-GFC highs (All Ordinaries again trading well above 6,000), retail investors have capitalised on a decade long bull run and corporate profits across many sectors are up on historic levels. To further sweeten the current dynamic, interest rates are at all time historic lows so borrowing money to fuel growth or make an acquisition has never been cheaper.

By reviewing the above all ord's chart its clear that corporate valuations have improved considerably since the lows that followed the GFC. Given that private company valuations often utilise adjusted public trading multiples, at a high level, we can also expect SME valuations across the majority of sectors will have also increased significantly.

When is the best time to sell?

The answer to this question will naturally depend on your individual motivations and financial situation however from a purely financial position the answer must certainly be when valuations are at the peak of the cycle?

Using the All Ord's as a proxy for the SME market would suggest that valuations are the best they have been in 10 years, however all business owners should carefully consider the graphic below.

Industries and their sub-sectors go through valuation cycles driven by demand from acquirers (industry and private equity) and movements in multiples of comparable listed companies. The price or “P” your industry is attracting in the market will therefore vary.

Business owners traditionally tend to focus on building business value by concentrating on their earnings or cashflow, i.e. their “E”. Most business owners however are unable to appreciate the overall valuation picture… their “PE” ratio.

BSP Strategic has access to valuation and transactional data across a wide range of industry sectors and can help you to understand whether sectors present:

Vendor divestment opportunity (business sales) – within sectors that are hot.Acquisition opportunities – within sectors that are cold.

Capitalise on substantially improved market conditions and contact us today to learn more about how your sector is tracking in the current market. With just 5 weeks until the end of the financial year - now is an excellent time to review your position.

If you own a Queensland based business and are looking to retire this year or next you need to take immediate action. It probably doesn't come as a surprise to hear that many of your peers are also thinking of exiting / or selling their business over the next few years. Recent research by Xero (accounting software provider) indicates that around 25% of all business owners will attempt to retire this decade. That's more than 100,000 business owners all trying to sell at the same time!

Source: Xero - Success through succession planning.

With so many business owners planning on selling their business it is accurate to say that there will be more than double the historical average number of businesses for sale over the coming years.

So what does this mean for you as a vendor?

1. Increased competition for buyer attention.

2. Less leverage in the negotiation process.

3. Reduced valuations.

4. An increased likelihood of not selling.

5. The prospect of not being able to fund your retirement from the sale of the business.

What can you do to mitigate against these imposing trends?

The number one strategy we recommend is to firstly develop a detailed exit plan. You have probably all heard the adage, if you fail to plan then you plan to fail?, well this rings especially true when it comes to the complex matter of exiting your business.

A professionally prepared exit plan will critically evaluate your business in its current form and identify those areas of your business which are likely to make your business more difficult to exit or sell and identify those areas of your business which buyers find the most attractive. An exit plan will also start you thinking about just who is likely to pay the most for your business or who you want to take the reigns once your gone.

Ultimately a good exit plan will help to identify the risks, growth opportunities, timeline and most appropriate exit strategy and then use this information to formulate a clear strategy and list of action items / projects to be undertaken in order to optimise your readiness for exit.

By optimise i mean,

1. Mitigate the risks to future cash flows;

2. Make the business more attractive to a strategic acquirer; and

3. Increase the valuation.

Check out our website bspstrategic.com.auif you would like to learn more and download our guide entitled "10 Strategies to prepare your business for sale". The guide provides useful strategies that you can easily implement to help increase your prospects of a successful exit.

Want to know what your business is worth?

Check out this quarters summary of private deals compiled by Pratts Stats.

The free report provides general trend information on valuation multiples and profit margins for transactions so if your thinking about selling your business this year it is a must read!

When valuing a business, selection of the correct multiplier is critical to achieving an accurate well founded and justifiable valuation.

Some of the more commonly used acronyms for valuation multipliers include;

- Sellers Discretionary Earnings (SDE);

- Net Sales;

- Gross Profit Margins;

- EBIT; and

- EBITDA.

All multipliers are useful in different situations although it is beyond the scope of this article to detail there best uses. Often when selecting a multiple it is useful to evaluate comparable transactions across several types of multipliers. For example, if i was determining a suitable multiplier for a manufacturing business i would compare other business sale transactions on the bases of the actual sales price divided by both EBIT and EBITDA as then i would begin to understand the impact of depreciation and amortisation on the valuation. Given that most manufacturing businesses are capital intensive it is arguable that the an EBIT approach should be used as this form of multiplier is reflective of the earnings of the business after the cost of depreciation or necessary replacement of assets.

If you want to know more about the value of your business please get in touch.

We’ve recently analyzed the latest data from users of The Value Builder System™ and the findings present an interesting snapshot of the current value of privately held businesses.

Below are a few highlights although the report itself provides fantastic insight into the attributes of businesses that drive value and those businesses which are receiving the most interest in the current market.

Owner optimism bounces back

More than three quarters of business owners who completed their Value Builder questionnaire last quarter expect their sales to increase in the next quarter.

The Business Liquidity Index ("BLI") has seen a slight increase

Each quarter, we measure the proportion of business owners that received an offer to buy their business and express the proportion as an index, 100 being the average. The BLI jumped from 90.8 to 94.1 for the quarter ending December 31, 2016, showing that, compared to the previous quarter, a larger proportion of business owners had received an offer to buy their business.

Average offer multiple jumps to 3.95 times pre-tax profit

Moving in lockstep with the BLI, the average offer the users of The Value Builder System received in the last quarter jumped from 3.435 times the pre-tax profit in Q3 of 2016 to 3.95 in Q4, 2016. When we isolate larger companies with at least ten million in annual revenue, the average offer multiple goes up to more than 5 times pre-tax profit. The BLI and average offer multiple usually move in the same direction, since very active markets tend to drive up offer multiples and when less offers are made, multiples go down.

Our latest analysis includes data from more than 25,000 users of The Value Builder System from around the world. Of the business owners surveyed, 96% had revenue (annual turnover) of less than $20,000,000, while 4% had revenue in excess of $20,000,000. Findings are considered statistically accurate +/-0.81%, 19 times out of 20.

The latest data shows a positive trend in the market for privately held businesses. If you’re planning to sell your business in the next few quarters, we recommend you do everything possible to maximize the sale by focusing on the eight key drivers of business value.

Download your copy of the latest research by clicking the image below.

Selling a business is complex and there are many issues to consider. Here are just a few of the leading considerations to think about in the lead up to the sale.

1. Is my business ready for sale? (contracts, leases, accounts, staff, systems, debt, etc, etc)

2. What is my business worth today?

3. How will this years trading and forecasts impact value?

4. What is my story / why am I selling?

5. How do I sell the business? (agent vs DIY?)

6. How should I structure the sale? (asset vs share)

7. How much tax will I pay on the sale? (What concessions are available)?

8. Am I prepared to become an employee for a period of time to effect a handover.

9. What can I do to improve the value of my business this year?

10. Who will buy my business and what will they be prepared to pay for it?

If you are serious about a selling your business please get in contact for a no obligation discussion about these points and your specific circumstances. We provide a range of specialist services for business owners looking to exit their business with the aim being to facilitate the best possible exit on your terms.

Please also take a few minutes to complete the value builder score questionnaire explaining how your business ranks against the 8 drivers of business value and to obtain an estimate of the current value of your business.

Investment guru, Warren Buffet is renowned globally for his rigid principles and investment philosophies. When it comes to buying and selling he has proven over the decades that not all investments (or investors) are created equal and adherence to strict investment principles provides the best results.

Warren has built his vast empire based on his ability to see value where others do not. He knows, above all else that "Price is what you pay and value is what you get".

So what does this statement mean? Price as we all know is simply the amount of currency that changes hands. Sure deals are often done with a mix of cash, shares, earn out agreements, etc however all are easily translated back at a point in time to an amount of currency.

Value on the other hand is a little less easily quantified.

Fair value is the accepted measure of business value which assumes the purchase of a business by a financial buyer (one that is motivated simply by a return on investment). However

businesses are rarely bought and sold at fair value. Businesses are usually bought by those with some level of strategic reasoning for making the acquisition (these buyers are known as strategic acquirers). Strategic acquirers may pay more than the fair value of the business as they see value where the financial acquirer does not.

So it seems that value is therefore somewhat subjective and where the value of a business sits will ultimately depend on your position as a buyer in the market. Value can be clear and accessible for some, but impossible to achieve for another and therefore not valuable. What is clear is that value is dependent upon the perceptions and motivations of the buyer and all buyers will therefore be different.

So how do you make your business more valuable. First of all you need to think like a buyer. Consider the following for your business.

Please also take advantage of our free assessment tool that rates how valuable your business is against 8 key drivers of business value. It takes just a few minutes and you will instantly receive your free Value Builder report.

As you may expect the undeniably straightforward answer to this question is a resounding YES!

Acquirers typically pay the most for businesses which have the potential to grow. In rare cases, an acquiring company may even buy a business with lots of growth potential yet performs relatively poorly on many other business attributes because the buyer sees a way to leverage some of its own assets to help the business grow much more quickly than it could otherwise grow under the current ownership. These types of acquisition are know as strategic acquisitions.

Think about growth from a numbers perspective.

Consider a business with $1m profits each year that expects to have stable earnings with no growth for the next ten years. That is it would generate $10m in profits over 10 years, obviously the earnings need to be discounted to today's value to take into account the delay in receiving the $10m over ten years but lets just keep this simple for now.

Now consider a business that generated $1m profit this year but expects to grow at a rate of 20% per year for the next 10 years. i.e $1.2m in year 1, $1.44m in year 2, $1.73m in year 3, etc.

If you were to add up all of these annual profits, the total would be $31.1m. Even prior to considering any form of discounting, it is clear to see how business growth potential impacts the value of the business. Clearly if you were choosing between the two comparable businesses the business which is forecasting growth is going to be more attractive to a buyer and more valuable.

There are essentially 3 forms of growth potential.

1. Geographic Scalability - How viable is it to establish your business in another location?

2. Horizontal Scaleability - Sell more to your existing customers

3. Vertical Scaleability - The ease of which volume can be added at minimal cost.

If you are a business owner consider the following questions for your business and then consider how your answers would be perceived by a potential buyer.

- Would you business model work in another geographic location, Brisbane, Gold Coast, or further afield, such as Hong Kong or New York?;

- Is the business model able to transcend cultural differences?

- What other products or services would your customers buy from you?

- What would you have to change in your business to enable you to handle 10 times as many customers?

- What untapped customer groups remain to be exploited?

- How can you automate your service delivery process so that smaller sales are more efficient?

- Could you franchise or licence your model to others in other locations?

- How could you grow your business as quickly as possible if money was no objective?

How you answer these questions is a key indicator of your businesses growth potential and provides some insight into how prospective buyers will view your business and consequently how growth potential impacts business value.

So here's the hot tip, if you are wondering what you business might be worth ahead of selling, start by mapping out what your future growth potential looks like. If you are able to convince potential buyers of the future growth prospects your business, your business will be much more attractive and likely sell for a higher price.

If you are planning to sell your business or are considering your offer to buy a business, it makes good sense to obtain an independent appraisal of the business first. A business valuation is not a cost - it is an investment.

Business valuations provide invaluable insight into the real value of the business and enable buyers and sellers to better position themselves for the transaction and negotiate with confidence - knowledge is power!

What is business value?

Theoretically, business value (also known as Enterprise Value) is the price at which a business is likely to change hands between a willing but not anxious seller and a willing but not anxious buyer. This is known by Business Valuation Specialists as the “Fair Value” of the business. The Enterprise Value includes all of the assets and goodwill of the business used to generate its cash flows.

Practically, it is important to realise that the value of a business will be perceived differently by different parties, this is because buyers and sellers have different motivations and will have a differing assessment of the risk and growth profile of the business. Some buyers will see value and opportunity where others will not.

Ultimately a business is worth what a buyer is prepared to pay for it, however when it comes to negotiating the final sale price, understanding what the fair value is along with the factors that influence and detract from business value is crucial to getting the best deal.

Therefore to be able to negotiate the best deal it is highly beneficial to have some sort of understanding of the attributes that drive business value and how they interact with commonly used valuation methods.

Knowledge is power and having an understanding of business valuation theory as well as each the degree to which each of the individual drivers of value impact your business’ value provides owners and potential buyers with considerable advantage throughout all stages of the sale or purchase process.

For example from the business owner’s perspective (vendor) having an understanding of value and value drivers provides:

The ability to promote and enhance the business’ value driving attributes and less emphasis on those that detract from value;The opportunity to address those attributes which detract from business value;Justification and support of the asking price of the business;Surety that your asking price is realistic in the current market; andAbility to negotiate with confidence.

For sellers having an understanding of value and value drivers provides:

Objective and independent opinion on the fair value of the acquisition;Guidance as to initial offer price;Identification of the attributes that may have strategic value; andAbility to negotiate with confidence.

For business owners who are perhaps working towards a planned future sale, knowing what drives the value of the business well ahead of a sale can provide very valuable insights into how they can positively influence business value and make the business more attractive to buyers in the lead up to the sale.

Business Valuation Basics

Business value may be calculated using a large number of accepted valuation methodologies although some methods are more ideally suited to particular situations.

Some of the more common approaches include;

Capitalisation of Future Maintainable Earnings (CMFE);Discounted Cash Flows (DCF);Net Asset Backing; andReplacement Value.

When determining which valuation method is the most suitable, a business valuer would normally consider key business attributes such as:

The trading history of the business and stability of its profits;The level of assets used to generate revenues;The growth trajectory of the business (start up or long established); andThe purpose of the valuation (some methods are more rigorous than others and therefore better suited where additional detail is required).

This information will determine which method best suits the situation.

Most small businesses are sold using some form of a multiple of profits approach with the most popular method of small business valuation being the CFME method. Under this method Enterprise Value (Business Value) is calculated using the following formula.

Adjusted Profits x Capitalisation Rate = Enterprise Value.

As you can see the valuation formula has two main components, Adjusted Profits and the Capitalisation Rate. Therefore to increase business value, simply increase the adjusted profits, the capitalisation rate, or increase both.

A brief overview of each is detailed below:

Adjusted Profits

When selling a business a buyer will be very interested in how much profits the business generates, this is because they will try to figure out how know long it will take them to earn enough cash flows to repay their investment.

The historical results of the business will be analysed and used as a guide to predict the likely future earnings of the business.

It’s important to know that most business valuers will add back and deduct various non-cash items along with non-commercial, extraordinary or private income and expenditures such as private use of motor vehicles, fines, one off costs, related party transactions, etc. The process of adjusting the profit and loss to reflect the true earnings of the business is known as the “normalisation” process. Theoretically, the adjusted profits will be representative of the minimum earnings of the business in future years and will also take into account any evidenced growth trends.

Capitalisation Rate

The capitalisation rate is also known as the Multiple or the Multiplier. The capitalisation rate is impacted by a variety of factors which fundamentally relate to either the risk profile of the business or its potential for future growth.

For example a capitalisation rate of 3 essentially means that the buyer expects to wait only 3 years to repay the purchase price. A capitalisation rate of 4 means the buyer is prepared to wait 4 years for the payback of the initial investment. As you may imagine, higher multiples are only acceptable to buyers when the risk to them is less. On the contrary the higher the risk associated with repayment of the purchase price, the lower the capitalisation rate they will be prepared to pay.

The risk profile of a business (in the minds of a buyer will be influenced by factors such as:

Will the business continue to generate revenues after the current business owner leaves?Will the staff stick around?What happens if their key supplier goes out of business?Is key intellectual property protected?How reliable are the profits and what % of revenues are recurring?Are key licences and contracts transferable?The overall scale of the business revenues;Are new technologies or imports threatening the industry?Are there any contingent liabilities to consider?For location dependant businesses - is a long term lease in place?What systems and processes are in place?Does the business generate positive cash flows;How liquid is the equity in the business.How differentiated are the products or services?

The Capitalisation rate is also heavily influenced by the businesses ability to grow. Businesses with significant potential to scale up their operations quickly are held in high regard by buyers and so attract higher Capitalisation rates. Buyers will be looking for attributes such as;

A growing market;Current % of total available market share;Ability to significantly scale up operations;Cross selling and product development opportunities;Commercial reach and ability to influence;Ability to access new markets.

What is strategic value?

Essentially, there are two kinds of business buyers, financial acquirers and strategic acquirers. A financial buyer is a buyer who is looking to purchase a business based on the cash flows generated by the current business model. A financial buyer will negotiate based on the fair value of the business.

The strategic buyer however is motivated by other factors and sees the business model from their unique existing position in the market. Strategic buyers often look to leverage the vendor’s business model in a way that helps the buyers existing business to; sell more products and services, increase its margins, eliminate the competition or access new markets. Strategic buyers will typically pay more than the fair value of your business as they stand to make more from the acquisition.

Of all 8 key drivers of business value, the financial performance of a business is often assumed by business owners to be the most important driver of business value. Arguably this is true as (in some circumstances) business value can be calculated by multiplying the maintainable earnings of the business by the capitalisation rate.

Clearly under this approach the greater the amount of earnings or profits the higher the business value. Typically this is how most business owners think. Buyers on the other hand think differently.

From a buyer’s perspective the historical performance of a business is somewhat irrelevant. Buyers are only really concerned with whether or not the historical revenues and profits can be reliably used as guide to predict its future revenues and profits and ultimately the businesses ability to repay their investment.

Buyers care very little about what happened 3 years ago, they are for more concerned about what is going to happen three years from now! Buyers only care to answer one simple question, when will this business generate enough profits to repay what i pay for the business?

If this is true then why do we care about historical financial performance?

The truth is, nobody has a crystal ball and often the most reliable indicator of the future is some sort of analysis of the past.

Therefore to present a meaningful forecast for the future it is prudent to critically analyse past trading results by adjusting the historical financial performance through the elimination of abnormal, non-recurring, private or discretionary items, etc. The objective of the “normalisation” process is to evaluate what the true earnings potential of the business is for the review period based on the stripped back core business model.

For example as most small businesses are run to minimise profits (and therefore tax) it is necessary to prepare a Pro Forma set of financials for recent financial periods which effectively “looks through” unnecessary and private transactions etc so as to determine what the “true profits” of the business would have been. This might mean adjusting for non-commercial owner salaries, private motor vehicles, inter-entity transactions, accounting policy changes, etc. With the underlying profits of the business model front of mind, we are then able to start the process of predicting the future.

Business valuation experts and business buyers together with their advisors will usually construct their own financial model from which to build a prediction of future earnings. The financial model will attempt to bridge the gap between historical and forecast by developing a number of both positive and negative revenue and profit scenarios which utilise all known current data such as sales contracts, lease agreements, open tenders, customer order books etc. The main objective is this exercise is to apply the ratios and logic of the past to likely future events in an effort to predict the future earnings of the business.

When buyers and their advisors critically evaluate the financial performance of a business either as part of the valuation process or through the due diligence process the general quality of the accounting records is almost as important as the results themselves.

Clarity, transparency, accuracy and adherence to accepted accounting standards is paramount to how buyers will perceive the historical performance results and also bear huge influence over the valuation and negotiations process.

Inconsistent, contentious, or misleading accounting is possibly the greatest killer of trust, value and deals above all other factors. From a buyers perspective, messy accounts, complex inter-entity transactions, changes in accounting policy, non-alignment with ATO records, or contentious treatment of transactions all lead to heightened levels of risk that the past results may not be reflective of the future.

Generally speaking the higher the level of risk about the reliability of future earnings, the more the buyer will discount the earnings of the business which will drag down the business value. Increased risk also leads to greater potential for a buyer to simply walk away from the acquisition.

Poor accounting also speaks volumes for the management of the business with most buyers interpreting poor records as either inability to effectively manage or plain mischief.

Not surprisingly advisor fees also tend to increase in line with the perception of risk. Buyers will be reluctant to pursue an otherwise attractive business if the costs to clarify the true state of earnings become cost prohibitive or time consuming. For many buyers, there’s another business down the road that looks just as good!

The quality of your historical financial records is critical to both the calculation of business value and the business owner’s ability to secure an exit deal. Many business owners seek to improve the credibility of their financial records by engaging a reputable audit firm to conduct a review of their annual performance.

In summary, historical financial performance is a key driver of business value however in order to be meaningful to a buyer, the past results must be as credible as they are a prediction of future earnings.

Watch John Warrillow author of the book Built to Sell explain how financial performance drives business value in the video below.