No ten-point list can ever hope to supply you with every imaginable consideration when it comes to buying a business. The following factors – listed in no particular order – should be a good jumping-off point, but feel free to expand on them and dig even deeper to decide that the business you plan to buy is right for you.
1. Consider the History – Plan For the Future
Business price is typically based on historical factors – real estate prices, equipment and inventory value, the net earnings the business brings to the owner. By considering what you can do with the business once you took over should be a factor in determining whether it is a good buy. While future potential earnings is dependent on the efforts of the new owner, it is not usually a factor that is heavily weighted into the asking price of the business but can be the reason it is purchased and brings a price that is towards the higher end of the value range.
2. Look For a Solid Foundation
A business that has been shown to flourish despite past financial downturns is one worth considering. As the saying goes, “You can’t make a silk purse out of a sow’s ear.” This means that a weak company will hardly grow into a great one simply by making a few changes. With all the terrific opportunities out there, it hardly makes sense to buy a business simply because the price is right.