One of the questions many people ask is how much cash flow they need from their acquisition target. When a certain person buys a business, the answer is: at least enough for you to experience a good living. This may be $80,600 to $95,000 per year. This may sound poor, but this is only an initial and will dramatic increases when acquisition debt is paid off and/or the business is grown. The level of management is very crucial. We need the business we buy to be self managed because we are not going to show up there every day, at least that is the assumption we make. While analyzing the possibilities of the acquisition. It is important to know what sort of business that is too small to buy.

When everything is stable, we need to go a level up and expand. A $390,000 – $490,000 of net cash flow a year starts to get us interested. Why? Because that small business is generally larger than the average retail establishment and requires a level of management to support it.

Thus we need the earning level to be high enough to finance that kind of layer of management and we can still afford the minimum level of salary. Once the business is bought we can show up anytime we want. Thus the earning level should be high enough to finance that kind of layer of management and still afford us that minimum level of salary.

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