Like any asset, a business is only worth what someone is prepared to pay for it. Prospective purchasers should only buy a business after conducting a thorough due diligence process, which means obtaining and analysing all the information that you need to decide how much the business is worth and whether to buy.
Failing to take time to find out about all aspects of the business may result in a costly mistake. The information you obtain and analyse should relate to all areas of the business, both financial and non-financial.
Obtain detailed professional valuations of all assets and liabilities of the business you want to buy to reduce the risk of making a bad purchase and give your potential business the best chance of success.
The selling price is usually set by the owner who arrives at the sale price in a number of ways. It might be based on the previous purchase price, the original investment or by comparison with other businesses on the market. Other methods include the value based on future earnings, or on a comparison with the cost of setting up a similar business from scratch.
However, the selling price does not always accurately reflect the value of a business and prospective buyers should always conduct an independent valuation.
Back to Business & Advisory