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Common Mistakes Ambulance Business Owners Make When Calculating Cash Flow

Last updated on September 5, 2012 by Sozo Staff

When you’re trying to sell your ambulance business, demonstrating cash flow is crucial. Whether your ideal buyer is hoping to quickly replace an income or make reinvestments that boost returns down the road, they need to be reassured that profitability is a possibility. By calculating cash flow with a buyer in mind, business owners can increase their chances of a rewarding sale.

Failure to Recast Financials

Buyers tend to look for a steady stream of earnings. Yet most business owners are in the habit of reducing the appearance of cash flow. That’s because during normal business operations, a lower net profit means a lower tax obligation. Unfortunately, potential buyers may not understand this strategy – particularly if they have never owned a business before. If investors misinterpret cash flow, they may not stick around for an explanation.

If your financial statements were last prepared for tax time, a transportation business broker can recast financials to demonstrate your true earnings. For strategic buyers interested in long-run profitability, professional brokers can construct cash flow models to communicate strategic benefits.

Making Assumptions about Value

Because cash flow is such an important factor in medical transportation business sales, many sellers make the mistake of assuming cash flow equals value. But basing value – and your price – solely on a multiple of seller’s discretionary earnings is selling your business short.

In addition to historical earnings and market growth, value is also found in hard-to-measure factors such as geographic location, employee skill, competition, reputation, and customer loyalty. A professional appraisal includes these intangible assets in your valuation along with tangible items such as cash and equipment – often resulting in a higher value.

Not Considering the Buyer

Buyers won’t purchase a business if they don’t think they can make money with it. But that doesn’t mean you’re out of luck if you’re not pulling in big bucks. While some buyers are looking to turn a quick profit, others are more interested in the non-monetary aspects of your ambulance transport business – such as independence of business ownership or the ability to use your company’s resources to grow their existing company.

Since the significance of cash flow varies by buyer, sellers can often increase their appeal by targeting the investors who have the most to gain from buying their company. Of course, this is often easier said than done, as your best buyer may not even be planning on purchasing an ambulance business. This is where an intermediary with ambulance business experience comes in handy. Your transportation business broker can draw on an extensive database of industry contacts to locate and appeal to the investors most likely to be able and willing to pay handsomely for your ambulance business for sale.

Filed Under: Transportation

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