IBA, as the premier business brokerage firm in the Pacific Northwest, is firmly established as a respected professional service firm in the legal, accounting, banking, mergers & acquisitions, real estate, and financial planning communities. Periodically, we will post guest blogs from professionals with knowledge to share for the good of owners of privately held companies & family-owned businesses. The following blog article has been provided by Paige Truong. Ms. Truong is a Senior Financial Analyst with Slalom (https://www.slalom.com/):
Why Cash Flow Is King When Selling Your Business – And How the Right CFO Can Maximize Your Sale Price
Selling a business is more than a financial transaction, it’s the culmination of years, even decades, of effort. When it’s time to step away, one factor consistently drives value and buyer confidence above all others: strong, reliable cash flow.
Even with impressive sales, poor cash flow signals risk. On the flip side, strong, predictable cash flow reassures buyers and often leads to a higher valuation and better deal terms.
And if you want to maximize that cash flow before selling, having the right CFO, even on a fractional basis, can be a game-changer.
Why Buyers Care More About Cash Flow Than Revenue
A potential buyer is thinking about one thing: What will this business earn for me after I buy it?
Here’s why cash flow matters more than revenue:
- It drives valuation – Buyers often pay a multiple of EBITDA. Better cash flow means higher EBITDA and a higher multiple.
- It signals stability – Predictable cash flow reassures buyers they’re not walking into a financial mess.
- It funds their acquisition – Many buyers will use your company’s cash flow to service the debt from buying your business.
The Red Flags That Kill Buyer Confidence
Even if revenue is strong, buyers will back away if they see:
- Overreliance on a handful of customers who pay late.
- Large amounts tied up in overdue invoices.
- Seasonal peaks without a cash plan for slow months.
- Overstocked inventory draining capital.
- Regular short-term borrowing just to stay afloat.
Practical Steps to Strengthen Cash Flow Before Selling
If you’re 12-24 months from selling, here’s where to start:
- Tighten receivables – Shorten payment terms and offer incentives for early payment.
- Manage inventory – Free up cash by cutting slow-moving stock.
- Negotiate supplier terms – Push for longer payment timelines.
- Reduce non-essential expenses – Eliminate costs that don’t drive profit.
- Diversify revenue streams – Make income less dependent on one client or season.
Where a CFO Changes the Game
Improving cash flow takes more than bookkeeping, it’s a strategic transformation. The right CFO, whether full-time or fractional, can:
- Spot inefficiencies you may have missed.
- Restructure operations for better cash management.
- Implement advanced forecasting so cash flow problems are addressed before they happen.
- Optimize pricing models and payment terms to smooth income.
- Boost buyer confidence by showing the business already operates with strong financial leadership.
“A skilled CFO can turn your business from ‘good enough’ to ‘deal ready’ and buyers pay a premium for that.”
The Payoff of Strong Cash Flow and a Strong CFO
When you combine steady cash flow with professional financial leadership, you get:
- Higher valuations
- More cash upfront (instead of risky earnouts)
- Faster closings with fewer due diligence concerns
- Multiple offers that drive competition
Start Early, Sell Strong
The biggest mistake sellers make is waiting until the final year to fix cash flow.
Start preparing 18-36 months before your planned sale. This gives you time to:
- Implement changes
- Show a track record of improvement
- Enter negotiations from a position of strength
And with the right CFO by your side, you’ll not only fix the numbers you’ll build a compelling, low-risk story that buyers can’t resist.
Final Takeaway:
If you want top dollar for your business, cash flow must be your top priority. Strengthen it now, prove it over time, and bring in a CFO who knows how to make your business irresistible to buyers. Your future self and your bank account will thank you.
Paige Truong is a Cash Flow & Profitability Expert with Slalom. If you have questions about the content of this article or would like to obtain information related to the services she offers her clients, Ms. Truong welcome communication at (206) 499-5207 or paige@shinefinancials.com.
IBA, the Pacific Northwest’s premier business brokerage firm since 1975, is available as an information resource to the media, business brokerage, mergers & acquisitions, real estate, accounting, legal, and financial planning communities on subjects relevant to the purchase & sale of privately held companies and family-owned businesses. IBA is recognized as one of the best business brokerage firms in the nation based on its long track record of successfully negotiating “win-win” business sale transactions in environments of full disclosure employing “best practices”.