Buying a Business: Interpreting the Value of a Business

If you are a prospective buyer looking to own you own business, you may have already noticed the unique nature of business listing prices- they seem to be all over the place.


How do you as a buyer interpret the asking price of a business as it relates to its actual value (which is basically what a buyer is really willing to pay for it)?


What follows are a few characteristics of a business that can greatly impact the value to you as a buyer, so be sure to look for them:


Consistent Numbers

If a business has very consistent numbers, it might mean less risk for a buyer. Remember that the value of a business to you is the earnings it will have in the future.


Operating Profits

In order for you to pay yourself and pay back any debt you incurred in the purchase of the business the business will need to be generating operating profits. A business who’s numbers consistently show operating profits will be a better bet than a business that is only breaking even.


Diverse Customer Base

In a business that has a diverse customer base (meaning even the largest customer only holds a small percentage of what the business earns) the loss of a customer will not be as fatal as in a business with only a small handful of clients.


Reputation and Brand

A business with a great reputation or a very well established brand will have a more loyal clientele, meaning less work for you as the new owner regarding building a customer base.


Good Managers

If a business is well managed by the management staff without the owner having to be present 100% of the time, and if those managers are willing to stay on if the business changes hands, it can be a good sign for a potential buyer.


If you need help determining if the listing price of a business really fits with an actual evaluation of the business, you can also turn to the services of your business broker, as they will know the current market and what aspects of a business bring the most to a new owner.


Are you a future business buyer who has questions about the value of businesses you have seen for sale? Leave us a comment or question here and we will be happy to assist you in your business search.




Michael Monnot


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Michael Monnot


5111-E Ocean Blvd
Siesta Key, FL 34242

Michael Monnot


9040 Town Center Parkway
Lakewood Ranch, FL 34202


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