Posted by StevenS(CPA) on July 21, 2008 at 09:31:52:
In Reply to: Criteria posted by KJ on July 20, 2008 at 17:38:05:
Those are all awesome questions!
I am usually not an expert on any business that I buy, so when I find a business that I'm interested in I need to become an expert in that field as quickly as possible.
I am a really big advocate on getting as much advice from as many different sources as possible, from the taxi driver taking me to the airport to brokers and analyst on wall street who know the industry. Anyone who is willing to take a look at a project that I'm working on I am willing to listen too.
But my number on source when I'm looking at a business is to call and meet with a half dozen or more owners in the same type of business (in different markets of course) to get their opinions about what they see is the weaknesses, the strengths, the numbers, the management and if they were buying the business what would concern them the most? What do they see that doesn't look right? ect.
Business owners in the same type of business can usually spot when somethings not right in minutes right in front of you, while it may take me and my accountant days in research and analysis.
Now you can use comparatives and that gives you a close gauge, but it's not as valuable as a real human giving who has been working in the same business all their working life practically showing you what's wrong, why it's wrong and what to watch out for.
It will sometimes cost you a lunch or dinner, but its worth every penny, plus you get the added benefit of adding a network of advisers and people you can go to after you buy the business to ask questions and get recommendations.
It's worth the time and effort.
This also is the best way for a beginner to start because the financial numbers, the management structure, and the industry can be a huge learning curve.
To have someone there to explain to you what the numbers mean, why some are correct and others are out of place for that type of business is invaluable.
And it gives you confidence, as a beginner to look the seller in the eye and tell them, this is BS, when it is and not feel unsure about yourself or what you are saying.
I'm not sure if this totally answered your question but this is how I begin to analyze a business.
The first step is to find out how sound the business is, the next step is to figure out how I can make money with it.
But first you have to know where the business stands before you can know where you're going to take it.
I hope this helps.
- Criteria Nike 09:50:16 07/21/08 (2)
- Nike??? StevenS(CPA) 15:08:44 07/21/08 (1)
- Oh, don't be so bothered Wayne-NC 09:44:36 07/23/08 (0)