Ridout Barron

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Making an offer on an existing business

If you're looking to get into business in Calgary but you don't want to start one of your own, one option that you have is to buy an existing business. The owner may tell you to come back with an offer, and you need to know all of the legal aspects of the offer -- the terms and conditions, the timeframe, the stipulations about what the owner must do and more.

However, all of this starts with figuring out the value of the business so that you can make an offer. Remember, you can offer anything you want based on what you think the value is, but your focus has to be on finding a fair valuation so that your offer won't cost you money or be rejected outright.

One of the best things to do is to make a list of assets that the business has. This starts with property and land, but it also includes things like machinery and equipment, which could be just as valuable and without which the business would be nonfunctional.

You can also look at revenue. The higher the revenue stream, the more the company is worth since you can count on this income on a continuing basis. While doing this, though, be sure that you look at the overall trends. If the company had one up year that is an outlier, the revenue may be higher than it will be in reality.

Another crucial point is to remember the difference between revenue and profit. High revenue is good, but not if the expenses are so high that profile is almost nothing.

As you work through this process, be sure all of your legal documentation is in order.

Source: Entrepreneur, "How to Value a Business?," Stever Robbins, accessed June 18, 2015

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Ridout Barron
1827 14th Street SW
Calgary, AB T2T 3T1

Phone: 587-315-8454
Fax: 403-271-8016
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