How does one evaluate buying PART of an existing business? How to Buy a Business
I received a question from one of my viewers in South Carolina. Ben has an opportunity to buy part of a business and wants to know what he needs to do to figure out what it’s worth.
Splitting up businesses is a funny thing. Usually businesses want to combine to realize synergies. Think of two companies merging and eliminating some of the administrative staff. The result of the merger should be lower overheads as a percentage of sales.
I made this video to discuss what happens when you start splitting things up: https://youtu.be/zrKQWzxN58w
So if you buy part of a business and this leads to dis-synergies how do you figure out what a part of the business is worth? Well, all you can rely on is the sales figure.
Start by taking the sales of the existing company for the department or product lines that you’re going to be acquiring, then build yourself a new income statement.
Be prepared for a tough negotiation though, the parts may often be worth less than the whole and the sellers expectations may be very different from yours.
For a full education and help on buying a business, visit www.BusinessBuyerAdvantage.com
To learn how I can help you sell your business yourself, visit www.HowToSellMyOwnBusiness.com
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Do you live in the Maritimes? I’ve got workshops coming up on buying and selling businesses in the fall. Book now http://davidbarnett.eventbrite.ca
Thanks and I’ll see you next time.
