The seller's accountant Says, ‘You just need to put more money in.’
I have a client who is negotiating for a business which is overpriced.
He’s demonstrated that the business will not cash flow for him after servicing debt and taking a reasonable salary for the value of his work.
The seller’s accountant has said, ‘the buyer just needs to put in more of his own money.’
I made this video to show how that doesn’t make sense at all: https://youtu.be/vTsIwe_If88
It’s got a little math, but it’s not too difficult.
The point of the matter is that equity (a business owner or buyer’s cash) actually demands a higher rate of return than debt.
This is because it’s riskier. Lenders get paid first in the event of a liquidation.
If you put in more of your own money, you actually need an EVEN HIGHER rate of return.
Watch the video.
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