Updated: Mar 10
“But the business isn’t showing a profit.”
“Where did you come up with that price?”
“I can’t see paying that much for a business when sales haven’t increased for three years.”
As business brokers we hear these statements and many variations thereof, on a near daily basis. The reality is that the numbers are a great place to start in analyzing what a business may be worth.
So by all means study the profit from the income statement. Balance sheet strength. Cash flow from operations. Year over year comparison. Not only you as the buyer but also your lender will no doubt be studying all of the above and more to determine if the deal is a good one.
But from personal experience and in brokering businesses for many years now, we suggest that you look beneath the numbers at a variety of factors, some of which we will list below:
For starters, can you see yourself running the business you are reviewing? Could you be passionate about it, can you see yourself wanting the kind of schedule required, the approximate number of employees you will be managing, the type of employees you will be hiring, training and managing?
Does your skill set match up with the company? Regardless of how much money the company earns, are you a good fit to run such a company?
Have you taken a look at the sales and profit trends of the company for the past five years? Maybe the owner has taken his eye off the ball, maybe divorce or illness or any of a thousand other issues has occurred which has caused company profits to suffer. And are the tough times something you can correct, or is it a case of an industry or category that will continue to struggle-regardless of the time or talents you will bring to the table?
On the other hand, it may very well be the case that you can effect a turnaround quickly, perhaps painlessly, thus dramatically increasing the value of the company. Looking beneath the numbers, thinking outside the box, will help you determine whether the numbers are failing to tell the whole story.
As they say, don’t judge the book by its cover. If you were initially attracted to a certain business or industry, take time to look beyond just the P&L and balance sheet to see if there is a gem that you can polish.
For more information about a free, no obligation business evaluation or about selling your business, click here to call us at (866) 800-0990 for a free, confidential consultation.
#sellabusiness #selling #sell #businessbroker #evaluation #free #kansascity #missouri #kansas #stlouis #springfield #oklahoma #oklahomacity #southcarolina #columbia #ohio #huron #florida #westpalmbeach #illinois #chicago