As the old saying goes, the two best days to own a boat are the day you buy it and the day you sell it. Owning a business can sometimes feel the same way. There is an almost tangible excitement that comes from finally having the savings to make a down payment, and from realizing that you now have a chance to become your own boss.
Of course, the reality of owning a business can sometimes be different that a prospective business owners fantasy. For starters, the long hours that are needed to make any business successful have many owners daydreaming of the time when they clocked in, clocked out, and at the end of the month picked up their check.
If you are looking to buy a business, the best advice that any expert can give is that you save yourself the trouble that comes with buying a lemon. Just as you probably wouldn’t buy a “pre-owned” car without having a mechanic friend get a good look under the hood, there’s no reason to set down your hard earned cash without first having a professional business appraiser step in to give you an approximate net worth on a business.
Business valuation experts are able to determine the revenue and expenses of a business. From this, using a P/E or DCF ratio, they can extrapolate a price tag for the business that should be a fair representation of the market value. In addition, appraisers can spot any mitigating circumstances that may drive the profit margin of a company up or down, changing the business’s value in turn.
If you are seriously interested in buying a business, it does pay to do some homework on your own. You can easily approach any business listed by brokers or for sale in the markets (both print and online) and ask for any salient data as regards to price and earnings.
From this information you can usually extrapolate just how profitable of an investment a given business will turn out to be and if you will need business purchase financing. Using industry-specific multipliers, you can then extrapolate a rough idea of the amount that the business will sell for.
At this point, you should have found a short list of businesses that fit both your profit margin and the size of your savings. Now it’s time to meet with a valuation expert and set hi or her to work on finding out which company will best suit your needs. By buying a business with high profits, you should find yourself the master of your own destiny, and loving every minute of it.
© Peter Siegel, MBA - All Rights Reserved
www.USABizMart.com
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About The Author: Peter Siegel, MBA is the Founder & Principal of USABizMart.com - USA Businesses For Sale, one of the most popular business for sale related websites on the internet. He is also the author of three books on the topic of business sales and how to buy a business. The most current book is "Businesses For Sale - How To Buy Or Sell A Small Business". Mr. Siegel also writes a daily Business Opportunities Blog – at www.USABizMart.com/blog that covers all topics on selling, buying, valuing, and financing small to mid-sized businesses.
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