We recently posted the 8 questions to ask when buying a business, now we highlight each question in a little more detail.
What’s the business worth?
There are many ways to value a company. A valuation may be based on book value, a modified book value, replacement value or liquidation value. A business could also incorporate the earning value into the valuation to arrive at the final asking price.
The most important thing to know is how the seller arrived at the estimate of the business’ value, and if your estimate is similar. A business is not necessarily worth NN amount of dollars just because that’s the sale price.
The real value of the business is dependent on the income the business can generate. Understanding the financial statements should have given you an assessment of the business’ gross revenues, costs, and profit.
If you’re not an expert in valuing companies, then seek advice from a professional business valuator or your business broker.
About Brightblue Transition Solutions
Located on Vancouver’s North Shore we are the premier business broker in the lower mainland, contact us if you need any help buying or selling a business in the greater Vancouver or lower mainland areas.