Posted by on Aug 2, 2010 in
Uncategorized The food and beverage industry has always been one of the most attractive for the would-be entrepreneur. After all, each one of us must eat and drink to be able to survive and we have to pay much attention to the fundamentals! This may very well be true, but so many interrelated complex issues arise when you look to buy a business, that you should remember that only one in 10 companies such as this will actually survive. Correct valuation upfront and an adequate process of due diligence will help you to survive against these odds and prosper.
One of the key skills that you can possess when you get ready to buy restaurant business assets is the ability to communicate and to decipher information. You will need numerous meetings with the seller and don’t be surprised if the early ones don’t reveal some fundamental facts and figures. It is natural for the seller to be a little protective and to want to gauge your enthusiasm and see whether you are really serious and qualified before divulging delicate data.
Before you can start projecting a position in the future, you need to know some basic facts and figures. How many tables are there in the restaurant and what style of food does it focus on? How many covers, or meals are set per week and by day and if the menu is very specialized how strong are the supplier contracts and the subsequent supply chain?
Labor is a major cost in any business and particularly here. Find out how the costs breakdown and whether the strength of the entire business is based on the skills and strong personalities of key figures, notably the master chef. You may not expect to get a lot of the finer details during the early process, as a seller often wants to keep any news of a potential sale away from the employees until the appropriate moment.
Write up a check-list of questions to ask the owner; you should have hundreds and not be afraid to be very specific, nor to insist on detailed answers. Before you even go there, however, understand that this kind of business involves very long hours and is typically a seven days per week concern. You will definitely be required to be good at managing people, dealing with significant problems and you might have to be patient before you can expect to see any profit from your endeavours.
Some of the challenges you may well face as a new owner include the ability to consummate new relationships with your suppliers. Sometimes certain suppliers may view a change of ownership as their chance to amend contracts to their benefit. You must be able to deal with distraught people, who may be upset because their table is not available, even though they booked it but arrived late. Employee motivation is very important and you should be ready to deal with every situation as it arises, whether that means praise or even termination!
When you’re sure that you are cut out to buy business interests in the restaurant industry, have tabled the right questions and received the comprehensive answers, are happy with your interpretation of the financials and contracts, then you are ready to discuss the value. Experts in this field should be engaged to help you understand what you are dealing with and you should use their findings to help you solidify your thoughts. If you know what the business bottom line is, the salary take of the owner, net profits and owner benefits, then you should adjust this figure according to any capital expenditure you feel is important.
With any restaurant for sale, the three major costs involved – labor, rent and food, should be no more than two thirds of total expenditure and always remember that you will have to have a superb marketing plan so that you can tell everyone about your new creation.
Richard Parker is the President and founder of the prestigious Diomo Corporation – The Business Buyer Resource Center. His celebrated materials, seminars and consulting have encouraged thousands of aspiring business buyers from around the World to pursue their dream to buy a business.
Tags: business, marketing, retail, sales, wholesale
Posted by on Jul 23, 2010 in
Uncategorized Whenever you buy a business, you will have to refer to a complex set of dynamics and will certainly do some work. Many tangible and intangible elements will have to be taken into account and while you may come across benchmarks in the industry, often quoted by those who are looking for a good price, every situation must be looked at differently. This can make it quite difficult when you are thinking about how to value a liquor store for sale, especially if you find a similar proposal nearby at a very different price. On the face of it, each appears to be somewhat similar in style, size and type of location, so why the difference?
Whenever you buy liquor store business interests, the purchase will be represented by many different assets and the seller’s position at that time will be dependent on a variety of different factors. Some of these factors could include efforts already put in by the owner, marketing plans, client demographics, a particular focus on services or products, how well the staff interact and so on. It is therefore particularly important that you glean as much information as you possibly can, conduct comprehensive research and be especially diligent before you begin to decide whether it is right for you.
All of the following issues must be considered when you are contemplating the purchase of a liquor store:
* location.
* are revenues and profits sustainable?
* what is the customer database like, and could it be expanded?
* the terms and condition, portability of the lease.
* demographics and population shifts.
* any pending road construction.
* look at the employees, do any work for cash or favors and are many family members involved?
* any pending threats or opportunities that could significantly impact revenues.
Bear in mind that the liquor store industry tends to want to focus on industry benchmarks and while this is fine for some outline information, you cannot rely on it. No two businesses may be the same and either may focus on particular areas, such as beer and wine, or cigarettes or premium products, while the other focuses elsewhere. Look for abnormalities or something that really jumps out at you and make sure you understand why this should be. When all is said and done, is the bottom line of sufficient interest to you to go forward?
When you are assessing the business financials and particularly the revenues, you must dismiss any cash sales reported by the owner unless these sales are backed up by audited accounts and are included in tax returns. The outgoing owner cannot expect to receive the value for these “under the counter” sales, as he or she may well have not reported them for tax purposes in the first place.
The inventory must be relatively fresh and saleable and not be mainly composed of products that are not popular any longer or likely to sell. For example, a huge stock of winter ales will not sell well as you enter the summer months.
To establish a base upon which to value and then decide to buy a business, look at net income, add owner salary, any perks, received depreciation and interest and then deduct any allocation for capital expenses. You may have to make a capital expenditure in the short to mid-term if you think that improvements, upgrades or other necessary investments are called for.
Richard Parker is the President and founder of the prestigious Diomo Corporation – The Business Buyer Resource Center. His celebrated materials, seminars and consulting have encouraged thousands of aspiring business buyers from around the World to pursue their dream to buy a business.
Tags: business, marketing, retail, sales, wholesale
Posted by on Jun 13, 2010 in
Uncategorized Over the years, a gas station has been seen as a reliable investment, most especially when the price of gasoline was relatively stable and by world standards was seen as low in the United States. Not so long ago there seemed to be little pressure to cut back on oil sales or to cut down on our energy use and carbon emissions due to global warming. Now, however, conspicuous energy consumption is seen as being very bad policy and as gas prices have forged ahead in recent times, we’ve even started to look at electric or hybrid vehicles as alternatives. Nevertheless, it seems clear that as a society we will still rely on gas for our vehicles for the foreseeable future and as we develop, the typical gas station has become more of a convenient destination for a variety of other services and products as well.
This business type is very reliant on its location, which you must bear in mind when looking for a gas station for sale. While the value of the location may appear to be obvious, you must consult the local authorities before you go too far into your process to determine whether any significant road construction projects may be in the pipeline, or if there are critical environmental issues to address such as upgrading storage tanks, or past litigation for infractions. If you’re not careful, your income potential could be decimated!
There may not be a significant margin when it comes to a unit of gasoline sales, so often the value of a gas station when you buy a business will include ancillaries and other products or services. If the location you are looking at is not so advanced in these respects, consider the potential. Could you enlarge or install a convenience store, or license it out to another organization to handle it for you? Could you place a first-class car wash operation on property and benefit from revenues here?
To buy gas station business assets successfully, note that operations that are known to be full service (gas, car wash and c-store) will generally command up to three times whatever the owner benefit figure is. Owner benefits are referred to as salary, profits plus any perks, adjusted for depreciation, interest and any capital expenditure you may be forced to make. A smaller or simpler establishment may be of interest to you, due to the additional potential and in this case you might only expect to pay one or maybe two times the owner benefit.
Be careful when you look at the business financials, refer to your supplier contracts and have a good conversation with the landlord in advance. Be careful when talking to the landlord, as they may often try to ensure that the incoming new owner is fully able to make the business a success, before doing anything!
During the process of observation, you must be very aware as you observe what is going on at the gas station. Be careful if you see the owner working “hands-on” for considerable periods of time. If many of his family members are seen putting in a lot of effort, they may be working below market rates, being paid under the table or maybe not at all; what if you had to recruit paid staff to do their jobs? Make sure that you observe the busier time periods, counting traffic and people, so you can gauge the potential accurately and know how to create a good offer.
Richard Parker is the author of the How to Buy a Good Business at a Great Price series. As President and founder of Diomo Corporation – The Business Buyer Resource Center, his materials, seminars and consulting have helped thousands of business buyers realize their dream to buy a business.
Tags: business, marketing, retail, sales, wholesale
Posted by on May 24, 2010 in
Uncategorized There certainly is no feeling of freedom to compare with the joy of being self-employed and truly independent. Running a business gives you the opportunity to dictate the amount you earn and prepare for your future adequately. Nevertheless, there is quite a challenge ahead of you and no guarantees of success! Be aware that there are significant risks associated with buying a business and this concept is not for the faint of heart or for someone who is easily confused.
If you have never run a business of any kind before you may be wondering where to start. For many, the thought of buying an existing business is attractive as it can be said that a lot of the “dirty work” has already been done and there is a certain amount of bedrock already established. While this is certainly true, you need to ensure that you walk into any situation with your eyes wide open, do a considerable amount of research, consult qualified experts, ensure that you value the business appropriately and at all costs, conduct your due diligence thoroughly.
If you have determined that you are going to buy business interests, consider all the steps that you will need to take next. Be advised, there are no short cuts here and you should not let your heart overrule what you know to be correct. It is natural to develop an enthusiasm for what you are doing and the prospects ahead and if you see positive signs during your process of discovery, this can lead to you wanting to jump ahead enthusiastically. If you don’t watch out, serious problems can arise.
Successful entrepreneurs know that time in preparation, while it may be a very lengthy process and therefore somewhat costly, is money well spent. Those individuals who have bought a business for sale before will testify that their upfront efforts pay significant dividends as they move forward. Invest some of your money and educational materials and expect to spend a lot of money researching your business in terms of time allocated; do not be tempted to rush through to completion.
The self-employed business person possesses a certain number of essential personality traits and if you’re looking to buy a business, you must also be positive and realistic throughout the process. Right at the top of your list should be common sense and a realization that if something appears to be “too good to be true” then it always is, without question. Keep a good sense of humor as you go through this lengthy procedure and keep a positive attitude.
It’s essential to strive to be a good communicator, as you certainly will need to be, as the seller and other interested parties must be grilled for information, as you impart your needs and requirements to them. Being able to ask the right questions at the right time and correctly interpreting the answers is paramount.
Richard Parker is the President and founder of the Diomo Corporation – The Business Buyer Resource Center. His inspiring materials, seminars and consulting have assisted thousands of business buyers with achieving their life long dream to buy a business.
Tags: business, marketing, retail, sales, wholesale
Posted by on May 19, 2010 in
Uncategorized The food and beverage industry has always been one of the most attractive for the would-be entrepreneur. After all, each one of us must eat and drink to be able to survive and we have to pay much attention to the fundamentals! This may very well be true, but so many interrelated complex issues arise when you look to buy a business, that you should remember that only one in 10 companies such as this will actually survive. Correct valuation upfront and an adequate process of due diligence will help you to survive against these odds and prosper.
One of the key skills that you can possess when you get ready to buy restaurant business assets is the ability to communicate and to decipher information. You will need numerous meetings with the seller and don’t be surprised if the early ones don’t reveal some fundamental facts and figures. Normally, a seller will want to be just a little protective and will want to see how enthusiastic you are or whether you are really serious before any important data may be divulged.
There are some basic facts and figures to absorb before you are able to project your own figures for the future. How many tables are there in the restaurant and what style of food does it focus on? How many covers, or meals are set per week and by day and if the menu is very specialized how strong are the supplier contracts and the subsequent supply chain?
In any business, labor costs are significant. How do the costs breakdown in this particular business and be careful if the strength of the organization is entirely based on certain personalities, key figures, or even the master chef. You may not expect to get a lot of the finer details during the early process, as a seller often wants to keep any news of a potential sale away from the employees until the appropriate moment.
Write up a check-list of questions to ask the owner; you should have hundreds and not be afraid to be very specific, nor to insist on detailed answers. As you are preparing your position, though, remember that this type of business will call on very long hours and is typically a seven days per week activity. You will be required to deal with many “fires,” be great at managing people and your time and may not expect to see a specific net profit for quite a while.
As a new owner, you will need to set up and develop new relationships with all your suppliers. Some suppliers see a change of ownership as an opportunity to significantly “amend” their contracts, and prices. You must be able to deal with distraught people, who may be upset because their table is not available, even though they booked it but arrived late. Employee motivation is very important and you should be ready to deal with every situation as it arises, whether that means praise or even termination!
If you are really sure that you want to get involved with the restaurant industry, have thought about the right questions and received full answers from the seller, have crunched the financials and studied the contracts, then you are now ready to look at the business value. Always work with knowledgeable experts in the field who have experience in the restaurant industry and use their findings to backup your own thoughts. Find out what the bottom line is, how much the owner makes in terms of salary, net profits and benefits and then adjust this figure downward based on any capital expenditure you feel you may have to make.
With a restaurant for sale, expect your three major costs – food, labor and rent to be no more than two thirds of your total expenses and make sure that you have a first-class marketing plan so that you can tell the world about your new baby.
Richard Parker is the President and founder of the Diomo Corporation – The Business Buyer Resource Center. His inspiring materials, seminars and consulting have assisted thousands of business buyers with achieving their life long dream to buy a business.
Tags: business, marketing, retail, sales, wholesale
Posted by on May 6, 2010 in
Uncategorized Entrepreneurs often worry about how to accurately value and buy a business that is up for sale. There are many intangibles and these can be confusing when it comes to selecting the real value. It is possible to “number crunch” all the financials, pay some attention to benchmarks and get input from industry experts, and it’s also often possible to value freehold or leasehold assets, inventory and generally kick the tires. When it comes to an Internet business or website for sale, however, a whole different set of potential issues emerge.
The Internet has grown to become a very significant part of our lives, fundamental in many respects, even during its relatively short existence. It’s difficult to imagine how we would function in many respects without Internet access and our ability to jump online and find answers to our ever-growing list of questions. However, due to this invaluable nature, a website business should be more attractive. If the whole business has been put together well, then it could represent major growth potential. As we go forward into the new decade, we will undoubtedly rely more on the Internet for our research and the subsequent purchase of services and products.
While the Internet is a relatively new medium you may come across conflicting valuations and a confusing array of facts and figures. It can be truly difficult to value an Internet business, but the good news is that due to its very nature you will likely have all the resources available to help you research, right online.
Generally speaking, an Internet business is only as good as its website and its traffic generation methods. Remember that we are looking at Internet marketing methods, list generation, e-mail interaction and other variables and not conventional marketing approaches.
A website often relies on the strength of its domain name, and originality and creativity can sometimes represent a distinct value; you will be able to check this value at specific sites online. Remember that a majority of people find websites through search engines and the optimization of the site is important relative to the keywords used by the searchers. You will need to know what the specific keywords are for the business and how the seller actually markets them.
One of the first things you will need to do is to find out all about the construction and design of the website. If you are not technically astute, get help here. Find out who designed and built the website, who is currently in charge of maintaining it, what form of coding they used and where it is all hosted and maintained. You need to be able to ensure uptime and that you will have access to all the data and the ability to maintain the site religiously as you go forward.
Analyze the existing clients and see how long they have been loyal to the business. You will need to know how they discovered the site in the very beginning and also what marketing initiatives work best for the current owner. If it is a service related business, just who will provide the services after everything is sold. The talent required to run such a business should not be underestimated and if you need to rely on the outgoing seller, ensure that he or she will be willing and able to help you proceed.
With an unusual business niche, you might look on the one hand at this and conclude it could be a definite and exclusive asset, but be wary if your business operates in certain areas, as legislation in the future may impact you. It almost goes without saying that you should be sure that there is a demand for the services or products represented by this venture and never assume that a novel idea will sell simply because of what it is. It’s essential to buy website business assets carefully when you venture into the online world!
Richard Parker is the author of the How to Buy a Good Business at a Great Price series. As President and founder of Diomo Corporation – The Business Buyer Resource Center, his materials, seminars and consulting have helped thousands of business buyers realize their dream to buy a business.
Tags: business, marketing, retail, sales, wholesale
Posted by on Mar 22, 2010 in
Uncategorized Over the years, a gas station has been seen as a reliable investment, most especially when the price of gasoline was relatively stable and by world standards was seen as low in the United States. In the past, there wasn’t so much pressure to cut down on oil sales or to be selective in our energy use, due to carbon emissions and consequent global warming effects. Now, however, conspicuous energy consumption is seen as being very bad policy and as gas prices have forged ahead in recent times, we’ve even started to look at electric or hybrid vehicles as alternatives. Having said that, our society will continue to rely on gas powered vehicles for our transportation in the future and the typical gas station will develop into a destination for a variety of other products and services.
Perhaps more so than any other business, location is very important when it comes to the selection of a gas station for sale. You might think that the value of the location is obvious, but if you talk to local authorities before you go too far, you will be able to see if events such as road construction would factor into your equation, or whether certain environmental issues need to be addressed including storage tank upgrades, or if there have been past issues with litigation. In certain circumstances, these could decimate your income!
It’s certainly true to say that gasoline sales by themselves may not represent a significant margin potential, so to value a gas station when you’re looking to buy a business, you may often rely on ancillary sales and other products or services. Be careful when looking at a prospect as you need to be able to consider its potential. For example, what about installing a convenience store or finding another organization to handle it for you on a licensing basis. Is it possible that you could build a very good quality car wash on the property and achieve revenues this way?
If you want to buy gas station business assets correctly, you should note from the beginning that an operation which could be classified as full-service, in other words gas, car wash and c-store, could command up to three times the owner benefits. Owner benefits can be made up of salary, profits, any perks, while adjusted for interest, depreciation and any other capital expenditure that you might have to make. A smaller or simpler establishment may be of interest to you, due to the additional potential and in this case you might only expect to pay one or maybe two times the owner benefit.
Pore over your business financials, your supplier contracts and make sure that you have adequate discussions with any landlord involved. Many deals trip up at the landlord/tenant stage, as the landlord often takes it upon him or herself to try and ensure that the incoming new owner is up to the job of making the business a success!
Keenly observe what is going on at the gas station during the process of observation. You should be especially wary if the owner appears to be working “hands on” for long periods of time. If many of his family members are seen putting in a lot of effort, they may be working below market rates, being paid under the table or maybe not at all; what if you had to recruit paid staff to do their jobs? Observe key periods of time during the week and get good traffic and headcounts, so you can extrapolate the potential well as you prepare a potential offer.
Richard Parker is the author of the How to Buy a Good Business at a Great Price series. As President and founder of Diomo Corporation – The Business Buyer Resource Center, his materials, seminars and consulting have helped thousands of business buyers realize their dream to buy a business.
Tags: business, marketing, retail, sales, wholesale
Posted by on Mar 17, 2010 in
Uncategorized The food and beverage industry has always been one of the most attractive for the would-be entrepreneur. When we consider fundamentals, something that each one of us must purchase to survive, food and drink of course comes in at the top of the list. While this may be the case, there are many complex and interrelated issues to consider before you buy a business involving an existing restaurant and it’s important to bear in mind that less than one in 10 purchases will actually succeed. It is very important to value the business correctly upfront and if you go about your due diligence correctly you will have a good chance of surviving against these awful odds.
When you begin trying to buy restaurant business assets, you’ll quickly learn that one of the key skills you’ll require is the ability to decipher information and to communicate effectively. You will need numerous meetings with the seller and don’t be surprised if the early ones don’t reveal some fundamental facts and figures. Normally, a seller will want to be just a little protective and will want to see how enthusiastic you are or whether you are really serious before any important data may be divulged.
Before you can start projecting a position in the future, you need to know some basic facts and figures. What style of food does the business favor and how many tables are there in the restaurant? You need to know how many meals are served per day, per week and by month and if the menu is somewhat specialized, are the supplier contracts strong enough and is the supply chain sufficient?
Labor is a major cost in any business and particularly here. Find out how the costs breakdown and whether the strength of the entire business is based on the skills and strong personalities of key figures, notably the master chef. Tread carefully here as the seller may well want to keep news of the potential sale away from his employees, so you might not get some of the finer details right away.
When you start to compose a check-list of questions for the owner – and you might find you have hundreds, don’t be afraid to be as specific as you need to be and insist on appropriate answers. As you are preparing your position, though, remember that this type of business will call on very long hours and is typically a seven days per week activity. You will be required to deal with many “fires,” be great at managing people and your time and may not expect to see a specific net profit for quite a while.
As a new owner, you will need to set up and develop new relationships with all your suppliers. Some suppliers see a change of ownership as an opportunity to significantly “amend” their contracts, and prices. You must be able to deal with distraught people, who may be upset because their table is not available, even though they booked it but arrived late. Employee motivation is very important and you should be ready to deal with every situation as it arises, whether that means praise or even termination!
If you are really sure that you want to get involved with the restaurant industry, have thought about the right questions and received full answers from the seller, have crunched the financials and studied the contracts, then you are now ready to look at the business value. Always work with knowledgeable experts in the field who have experience in the restaurant industry and use their findings to backup your own thoughts. Find out what the bottom line is, how much the owner makes in terms of salary, net profits and benefits and then adjust this figure downward based on any capital expenditure you feel you may have to make.
With any restaurant for sale, the three major costs involved – labor, rent and food, should be no more than two thirds of total expenditure and always remember that you will have to have a superb marketing plan so that you can tell everyone about your new creation.
Richard Parker is the President and founder of the prestigious Diomo Corporation – The Business Buyer Resource Center. His celebrated materials, seminars and consulting have encouraged thousands of aspiring business buyers from around the World to pursue their dream to buy a business.
Tags: business, marketing, retail, sales, wholesale
Posted by on Mar 15, 2010 in
Uncategorized Many who advocate self-employment are adamant that there is no other way to achieve financial freedom or to enjoy that real feeling of independence. Running a business gives you the opportunity to dictate the amount you earn and prepare for your future adequately. Nevertheless, there is quite a challenge ahead of you and no guarantees of success! Buying a business may not be for the faint of heart and there are significant risks involved.
Those who have never run a business before may be quite confused and will be wondering where they should start. For many, the thought of buying an existing business is attractive as it can be said that a lot of the “dirty work” has already been done and there is a certain amount of bedrock already established. While this is certainly true, you need to ensure that you walk into any situation with your eyes wide open, do a considerable amount of research, consult qualified experts, ensure that you value the business appropriately and at all costs, conduct your due diligence thoroughly.
When you decide you will buy business interests, there are certain specific steps that you must take. Be advised, there are no short cuts here and you should not let your heart overrule what you know to be correct. It is natural to develop an enthusiasm for what you are doing and the prospects ahead and if you see positive signs during your process of discovery, this can lead to you wanting to jump ahead enthusiastically. If you don’t watch out, serious problems can arise.
Successful entrepreneurs know that time in preparation, while it may be a very lengthy process and therefore somewhat costly, is money well spent. Those individuals who have bought a business for sale before will testify that their upfront efforts pay significant dividends as they move forward. As such, expect to spend money researching your business in terms of time at the very least, invest in educational materials, and you won’t be tempted to try and rush through the process.
If you’re new to the world of the self-employed and you’re looking to buy a business, understand that you will need to possess certain essential traits and you must maintain a positive but realistic approach throughout. Always focus as you look through the haze and realize that if something is “too good to be true” then it almost always is; you need to cultivate a strong appreciation of common sense. Humor will definitely be an ally as well, as this procedure can be very lengthy and will require you to maintain a positive attitude.
Ensure that your levels of communication are good as you must be able to interact with the seller and other interested parties, while always maintaining your needs and requirements. Being able to ask the right questions at the right time and correctly interpreting the answers is paramount.
Richard Parker is the President and founder of the Diomo Corporation – The Business Buyer Resource Center. His inspiring materials, seminars and consulting have assisted thousands of business buyers with achieving their life long dream to buy a business.
Tags: business, marketing, retail, sales, wholesale
Posted by on Feb 24, 2010 in
Uncategorized If you’re looking to buy a business of any kind, keep in mind that this involves a complex set of metrics due to the dynamic nature of the purchase. Many tangible and intangible elements will have to be taken into account and while you may come across benchmarks in the industry, often quoted by those who are looking for a good price, every situation must be looked at differently. This can make it quite difficult when you are thinking about how to value a liquor store for sale, especially if you find a similar proposal nearby at a very different price. Why is there so much difference, even though each appears to be similar in type, style and size?
Whenever you buy liquor store business interests, the purchase will be represented by many different assets and the seller’s position at that time will be dependent on a variety of different factors. Some of these factors could include efforts already put in by the owner, marketing plans, client demographics, a particular focus on services or products, how well the staff interact and so on. It is therefore particularly important that you glean as much information as you possibly can, conduct comprehensive research and be especially diligent before you begin to decide whether it is right for you.
All of the following issues must be considered when you are contemplating the purchase of a liquor store:
* location.
* whether revenue and profits are stable and sustainable.
* the customer database and potential for expansion.
* how portable is the lease and what are the terms and conditions associated?
* population and demographics.
* any pending road construction.
* look at the employees, do any work for cash or favors and are many family members involved?
* look for any opportunities or threats that could impact your revenues in any way.
For some reason, people in the liquor store industry often want to focus on benchmarks and while you can certainly refer to these for information, never rely on them. It’s certainly true to say that no two businesses are the same and a variety of focus areas are possible – premium products, beer, wine and cigarettes. Look for abnormalities or something that really jumps out at you and make sure you understand why this should be. At the end of the road, however, look at the bottom line to determine how much the business is worth to you.
Look at the financials and consider the revenue make-up and take out of your calculations any cash sales that are reported by the owner, unless the sales are contained within audited accounts and have been included in tax reports. It is not fair for the outgoing owner to expect to receive value for these sales if he or she has treated them as “under the counter,” especially if they have not been reported for tax purposes.
The inventory must be relatively fresh and saleable and not be mainly composed of products that are not popular any longer or likely to sell. This would certainly be the case if you were presented with a stock of winter ales in the summer months.
To establish a base upon which to value and then decide to buy a business, look at net income, add owner salary, any perks, received depreciation and interest and then deduct any allocation for capital expenses. You may have to make a capital expenditure in the short to mid-term if you think that improvements, upgrades or other necessary investments are called for.
Richard Parker is the President and founder of the prestigious Diomo Corporation – The Business Buyer Resource Center. His celebrated materials, seminars and consulting have encouraged thousands of aspiring business buyers from around the World to pursue their dream to buy a business.
Tags: business, marketing, retail, sales, wholesale