What to Look For When Buying a Business

When you buy a business, it is important to understand the financials. Here are a few items that you want to look at:

• Revenues
• Number of units sold
• Average price of units
• Gross margin and markups
• Profit margin
• Owner’s Discretionary Income
• Number of employees
• How much employees are paid
• Current owner’s advertising methods
• Size of customer base
• How well the customer records are kept
• Any expansion potential
• Position relative to competition
• Location of business

You also want to note any trends that have occurred over the last 3-5 years. This list is by no means extensive, but it gives you a general idea as to how attractive the business is. If you have questions on evaluating various business opportunities, a good business broker can offer some valuable advice.