The Three Things That Actually Make a Business Saleable
I love seeing businesses in all their their forms. However, I became a broker and M&A advisor because I have spent most of my life inside businesses. I grew up in one of Canada’s early craft breweries that my father co founded. I built and sold action sports brands like Cascadia Board Co. I have consulted for hundreds of beverage brands through Swell Source manufacturing. I have also walked away from buying my dream business when I realized the the work did not support the life I wanted.
Over time, I have learned that a business is only truly saleable if it produces enough real profit to do three things at the same time. It must provide a livable wage for the operator. It must provide a return on the capital invested. And it must comfortably service debt.
If it cannot do all three, the buyer pool shrinks quickly.
1. It Must Provide a Livable Wage
When owners tell me what their business makes, one of the first things I look at is whether it can afford to pay someone to replace them at a fair market rate.
This is where many valuation conversations get distorted. If a business shows $400,000 in discretionary earnings but it requires the owner to work long weeks and carry all the key relationships, that number does not automatically translate into transferable value. A buyer stepping in needs to pay themselves a realistic wage for the role they are taking on.
In many industries that might be $120,000 or more. Whatever the number is, it has to reflect reality.
If the business cannot pay its operator properly and still have meaningful profit left over, what you have is a demanding job with risk attached, not an investment grade asset.
2. It Must Provide a Return on Investment
Once the operator is paid, there needs to be enough profit remaining to justify the capital being deployed.
Capital always has alternatives. A buyer can invest in real estate, public markets, or other private companies. They are taking on risk, so they expect a return that makes sense for that risk.
For example, if a business generates $500,000 in normalized earnings and $150,000 represents a fair operating wage, that leaves $350,000 as investor return before debt. If that business sells for $1.75 million, the return profile becomes compelling.
However, if after paying a fair wage there is very little left, the purchase price must fall or the deal becomes unattractive. Many owners unintentionally treat their entire income as profit when thinking about value, but from a buyer’s perspective wage and return are separate buckets. A healthy business must fill both.
3. It Must Comfortably Service Debt
Very few acquisitions are completed entirely in cash. Most involve bank financing, vendor take back notes, or some structured leverage.
That means the business must generate enough free cash flow not only to pay the operator and provide investor return, but also to make loan payments with a margin of safety.
Comfort is the key word. If debt payments consume nearly all available cash flow, the business becomes extremely sensitive to downturns. A slower season or a lost client can create immediate stress. Lenders know this and underwrite accordingly.
A saleable business is one where the numbers work not just in a best case year, but in an average one.
The Reality
I have seen high revenue businesses struggle to sell because the underlying profit structure could not support these three layers. I have also seen smaller companies attract serious buyers because their cash flow was clean, disciplined, and transferable.
Markets do not buy effort or history alone. They buy predictable, defensible cash flow.
If you are considering selling, the most useful exercise is to separate your earnings into these three components. After paying someone to replace you at market rate, what remains for the investor? After structuring reasonable acquisition debt, is there still room to breathe?
If the answer is yes, you likely have a very marketable business. If not, that simply tells us where margin, structure, or systems need strengthening before going to market.
Selling a business is often the largest financial event of an owner’s life. My job is not to inflate expectations, but to align reality with opportunity and position the business in a way that serious buyers can understand and finance with confidence.
If you want to see how your numbers stack up against this framework, I am always open to having that conversation.