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Design a Growth Plan for a Premium Purchase Price

By Rose Stabler
Published: January 14, 2013 | Last updated: October 19, 2015
Key Takeaways

Purchase price is predicated on current and historical cash flows, but a well thought out growth plan will increase the attractiveness and price of a business.

Potential buyers who are considering the purchase of a business are interested in knowing how it can be grown once they buy it. The growth potential of a business plays a major role in its value. While buyers will purchase a business at a price predicated on current and historical cash flows, their main motivation is the opportunity to grow the business beyond its current size.

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Therefore, in order to get a premium price on the sale of a business, the seller should outline a tactical growth plan that would delineate open opportunities that can be tackled and exploited by a buyer to increase sales and profit. It is important that existing growth opportunities be realistic and clearly communicated in writing. This document could serve as a template for discussion during initial buyer meetings. It would cohesively paint the larger picture of your business and translate into added value.

Design a Growth Plan

When an owner can describe realistic opportunities for growth that specifically illustrate the reasons why cash flow and profitability will grow after the business is acquired, a buyer’s perspective on return on investment may appreciate and translate into higher value. A documented growth plan demonstrates the viability of the company’s future and may identify opportunities that a buyer had not considered. The obvious objective in outlining your growth strategy is to show how sales can be increased.

Some areas to consider in developing a growth plan:
  • Are there additional markets that a new owner should pursue?
  • What additional products could be delivered to existing customers?
  • Are there products or services that can be offered to generate recurring revenue?
  • Where are the best profit margins realized and can they be expanded?
  • Can new customer segments be reached?
  • Can your technology be licensed?
  • Will demand for your product or service increase as population grows?
  • How will enhanced marketing campaigns and sales efforts affect growth?
  • Are there opportunities to grow through acquisition?
  • Can growth be achieved by expanding geographically, increasing manufacturing capacity, or adding multiple locations?
  • Would additional hires impact growth?
  • Or, would streamlining the workforce be more beneficial?
  • Is franchising feasible?
  • Are there online strategies ripe for growth?
  • Are there areas to explore that could decrease operating costs that you have not implemented?
  • Would the company benefit through additional workforce training and education?
  • Are there industry changes ahead that can be capitalized on to give your company a competitive advantage?
The above list is not meant to be all-inclusive, but touches on the key areas that are common to most businesses for potential areas of growth.


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Learn more about the Ten Value Drivers That Increase Sale Price of a Business.

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Written by Rose Stabler

Profile Picture of Rose Stabler
Rose is President of Certified Business Brokers. She has 25 years of business experience from serving in management and consulting positions in the Oil Gas, Biotechnology, and Manufacturing industries to working for private equity giant Forstmann Little & Company in the 1980's during the height of the LBO era. As an entrepreneur, she started and built an online promotional product firm that featured her own line of items of original concept and new to the marketplace, and sold the company 12 years later to a corporate acquirer.

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