As the owner of Walker Weir Property Management, Ryan Weir possesses
extended knowledge of property and business purchases. Buying an
existing business can offer various potential advantages, including an
established customer base.
Potential Cons
Before deciding to buy an existing business, one has to consider the potential downsides of a RWH transaction. Since acquired ventures often come with an infrastructure and an established customer base, the price can be significantly higher than the combined costs of starting a new venture, even if it involves construction. Another potentially negative aspect is hidden issues. The business could be in debt, or it could be owed money, leaving you with financial liabilities or assets that can be hard to collect.
Determining the Value
There are various methods for determining the value of a business.
Capitalised Earning
In a capitalised earning valuation, the investor determines the possible return on investment.
Excess Earning Method
This method is similar to capitalised earning, but it separates out the return of assets.
Cash Flow Method
This approach is usually used when the investor is trying to determine the size of the loan they can take out based on the cash flow of the business.
Balance Sheet Method
The balance sheet method requires the owner to value the company’s physical assets. The higher the value of his or her assets, the more their business is worth.
When Ryan Weir started his business, he carefully took every aspect of company valuation into consideration, and made sure that the financial situation was well in hand.
Sources:
https://www.sba.gov/starting-business/how-start-business/business-types/buying-existing-businesses
Before deciding to buy an existing business, one has to consider the potential downsides of a RWH transaction. Since acquired ventures often come with an infrastructure and an established customer base, the price can be significantly higher than the combined costs of starting a new venture, even if it involves construction. Another potentially negative aspect is hidden issues. The business could be in debt, or it could be owed money, leaving you with financial liabilities or assets that can be hard to collect.
Determining the Value
There are various methods for determining the value of a business.
Capitalised Earning
In a capitalised earning valuation, the investor determines the possible return on investment.
Excess Earning Method
This method is similar to capitalised earning, but it separates out the return of assets.
Cash Flow Method
This approach is usually used when the investor is trying to determine the size of the loan they can take out based on the cash flow of the business.
Balance Sheet Method
The balance sheet method requires the owner to value the company’s physical assets. The higher the value of his or her assets, the more their business is worth.
When Ryan Weir started his business, he carefully took every aspect of company valuation into consideration, and made sure that the financial situation was well in hand.
Sources:
https://www.sba.gov/starting-business/how-start-business/business-types/buying-existing-businesses
