Business exits
Why Buyers Pay for Certain Cash Flow, Not Just Profit
Saul Cohen argues that every valuation rests on two things, future cash flow and the certainty behind it, and that founders should decide early which kind of business they are building.
EP295 Is Your Business Built for Long Term Value or Just Survival? Featuring Saul Cohen
Video from Profit With A Plan Podcast.
Generated from the canonical interview transcript and validated against source data by Guests on Air.
What makes a buyer pay more for a business?
Buyers pay for future cash flow and for certainty that it will keep arriving. Saul Cohen, an accountant and acquisition adviser who has seen close to 200 deals, says every valuation move either raises the cash a business can generate or lowers the risk a buyer takes on, and that certainty, not raw profit, is usually where sales stall.
Most founders talk about their business in terms of revenue and profit. Saul Cohen, an accountant who trained at PwC and now advises owners on acquisitions and exits, says a buyer looks at it differently. On the Profit With A Plan podcast, he reduced every valuation to two questions: how much cash the business will produce, and how sure anyone can be of it.
That framing matters because it turns a vague goal, building a valuable company, into a test any owner can apply to a single decision. Every hire, system or new contract either adds to future cash flow or makes that cash flow more dependable. If it does neither, it is unlikely to move the price a buyer will eventually offer.
Cohen also warns that valuable is not the same as sellable for everyone. Some owners are better served by a lifestyle business that pays them well, and that is a legitimate choice. The mistake is drifting between the two without deciding, then discovering at exit that the business was never really built to be bought.
Key takeaways
- Buyers pay for future cash flow and for confidence that it will keep arriving, and every valuation sits on those two pillars.
- Certainty of cash flow, not the size of it, is the most common stumbling block when owners try to sell.
- A lifestyle business is a valid choice, but it needs a different exit plan from a business built as an asset.
- Culture and a smooth due diligence process can lift a price, even though no buyer will admit to paying for them.
1. Every valuation rests on two pillars
Cohen's starting point is that a buyer wants future positive cash flows and certainty around them. The valuation follows the same logic: take the profit, apply a multiple that reflects the risk an investor sees, and the price falls out. In his view, everything an owner does to build the business falls under one of those two brackets.
That gives owners a simple filter. A decision either increases the cash the business can generate or reduces its risk and raises its stability. Cohen says a founder is always doing one of those two things, whether they notice it or not, so the useful habit is to ask which one a given project is meant to serve.
The host called it one of the best explanations of the valuation process heard on the show, while noting that it is simple to say and hard to do. Under each pillar sit many strategies that can grow the cash or cut the risk, and the real work lies in choosing the right ones and running them well over several years.
2. Certainty is where most sales stall
In Cohen's experience, the owners who come to sell usually do have good positive cash flow. What they lack is proof that it will continue once they step back. Many businesses sit just below the level that interests private equity, which still leaves plenty of buyers, but each of them will price in every doubt about the future.
Part of the problem is that founders tend to downplay how much of the value is them. Their friends are often entrepreneurs too, so they assume their own drive is ordinary. Cohen says the most valuable businesses in this bracket are the ones that spread that entrepreneurial energy through the team instead of keeping it in one person.
The odds make the point. He cites figures suggesting that 80% of deals fail and that half of those reaching heads of terms never complete. A business whose cash flow is documented, repeatable and not tied to the founder's personal effort gives a buyer fewer reasons to walk away during that fragile stretch of the process.
3. Choose the kind of business you are building
Cohen's first step is not a tactic but a decision. He described a client that wrote software for banks and made a million pounds a year in profit from a single customer. That concentration made it unsellable, and the owners chose not to build the infrastructure needed to grow it into a multimillion pound asset.
Instead they used the profits to build a large property portfolio, and that became their retirement plan. Cohen sees no shame in that route. A lifestyle business can be very successful, but the exit plan changes: the value sits mainly in the cash it generates over its life, perhaps with a customer list or a few assets.
Owners who want to sell an asset face a harder road, with painful investment in systems, culture and processes to reduce a buyer's risk. Cohen believes the softer side counts too, estimating that culture and a smooth due diligence can be worth as much as 30% of a valuation when everything else is in order.
