In this category, you can find store-fronts, existing businesses, B&B’s and hotels. Some of the store-fronts and existing businesses own the property and others are tenets.
Buying an existing business can be a good opportunity to get into business without going through the process of starting from scratch. If you buy a turnkey operation, you can skip the startup phase entirely and begin operations as soon as the sale is complete.
It’s common to use several different methods of business
evaluation to arrive at a price. When preparing the asset list (spec
sheet), for instance, the seller could have used:
- Book Value (based on the company’s balance sheet)
Modified Book Value (book value adjusted to reflect the current
market value of the assets)
- Replacement Value (based on what it would cost to replace the
- Liquidation Value (based on what the asset would bring in if the
business was liquidated)
We will ask what method he used to set the asking price and then
confirm the numbers make sense,
The real value of an existing business depends upon the income that the business generates. Examining the business’s financial records should give you an accurate picture of the business’s gross revenue, costs, and profit. You want to buy a business based on the Return on Investment, not on the stated price. In other words, what you are really buying is the annual profit.
Accounting here is casual, especially with cash businesses.
If a lease, we need to make sure it will be renewable at a fair price.