For a smaller company, a real benchmark for what a buyer might pay for the business could be more than just the income generated from the business.

The real number might be the compensation that the owner is taking out of the business.

This can be especially true, for example, if it’s a subchapter S corporation where the company is being run to minimize the income and minimize the taxes that are being passed along to the owners. Even though the company might show very little income, it still could be a very attractive business because of what the owner is able to take as compensation.

If your company is in that situation in particular you should be tracking what you’re taking out as compensation and looking at those numbers year over year. Are you showing a positive trend and a nice increase in those numbers? Or are there spikes along the way that show a flat trend line over a long period of time? What can you do to increase that number and get it back on an uptrend? That way when it comes time to be selling the company could be much more attractive and carry a higher premium.

Your company, perhaps, might be in a different situation. There could be some value from what the company’s earning for income, however there also might be a significant impact from what you as an owner are taking in as compensation. Both numbers could be listed together in order to determine the total income generated through the business.

So no matter what situation you face remember that owner compensation will become part of the picture in terms of what the buyer of the business will be looking at, unless you’re in a mid to large size company where the owner compensation is small relative to the total income of the company. Know how your compensation number’s doing over the various years and do what you can to keep maximizing that number and you’ll maximize the value of your business when it comes to the point that you want to be selling.