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Business Guide

CONTROL IS THE BASIS OF EVERY EFFECTIVE MANAGEMENT!
 

How Much To Pay For Business?

Looking at the past performance of a business can give you a great deal of information about its potential value. If the owner refuses to show you the past records, don't buy the business. There are many business for sale, and most owners are willing to cooperate with serious buyers.

When reviewing the financial history of a business, go back five years if possible. There are two main financial statements that you or your accountant should review. Those are:

BALANCE SHEET
INCOME STATEMENT

The BALANCE SHEET shows the value of the assets and liabilities of a business on a specific date. It shows what the business is worth on that date if the owner sold all the business's assets and paid all its bills.

The INCOME STATEMENT indicates the amount of profit (or loss) acquired over a period of time. Most businesses prepare an income statement every three months to see if the business is in good financial health. The income statement lists the income of the business along with its expenses. The difference between income and expenses equals the profit or loss of the business.

From the balance sheet and income statement, the owner or potential buyer of a business can find out the following:

Whether the expenses of the business are in line with its sales.
How much profit the business is earning.
Whether the business owes too much money.
Whether the customers are paying their bills on time.
Whether the inventory (merchandise available for sale) is selling as quickly as it should be.

IF INTERPRETING FINANCIAL STATEMENTS IS NOT YOUR AREA OF EXPERTISE, YOU SHOULD CONSULT A PROFESSIONAL ACCOUNTANT BEFORE MAKING ANY PURCHASE DECISIONS.

RELATED INFO

Starting Business From Scratch
Buying An Established Businesss
Buying A Franchise
Market Research
Your Product Or Service
Your Customers
Your Competition
Getting A Financial Picture
Business Guide

RECOMMENDED  LITERATURE

A Basic Guide for Buying and Selling a Company - This outstanding guide contains all the essentials with regard to the interaction of people transacting for small businesses and how to maximize your chances to obtain fair deals. Explains how to effectively use a business broker, methods of payment available to the buyer, deal with an attorney, how the seller prices the company, and much more.

How to Buy and/or Sell a Small Business for Maximum Profit: A Step-by-Step Guide - This book provides a road map of suggestions, insights and techniques for both buyers and sellers. It covers the entire selling process step-by-step—from making the decision of when to sell or buy, through determining how to market the company, to understanding the various legal & financial documents involved in a sale, and on to closing the deal and handling the transition afterwards. This book is geared toward the novice entrepreneur who wants to buy or sell a small business. Topics covered include: finding and evaluating a business to buy and/or sell, how to value a business, raising the necessary capital, evaluating a business financial condition using discounted cash flow, excess earnings, asset value, and income capitalization, brokers, leveraged buyouts, letters of intent, legal and tax concerns and contracts.

155 Legal Do's (And Dont'S) for the Small Business - One of the most difficult aspects of starting and running a small business is knowing what are the requirements for compliance with the law ... and what legal pitfalls to avoid. This user-friendly guide, written by a practicing attorney, features a format that offers helpful cross-references and quick access to 155 major legal do's and don'ts in a variety of subject areas, including international transactions, intellectual property, contracts, computers, business succession planning, and more.

How to Really Start Your Own Business - W.D.Bygrave, professor of entrepreneurship, Babson College "Gumpert's how-to book is simply the best. No would-be entrepreneur should launch a business before reading this book."

 
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