Business Purchase Price Assessment - CapitalQ

Business Purchase Price Assessment

You’ve found a business you love and feel confident you can take it to the next level. That’s great, congratulations on being on the verge of your own show. So let’s make sure this is done right, so you never have to look back to a life where you weren’t in control.

Sure, the current owner has invested a lot of blood sweat and tears into their business, and they will want to be rewarded for that, but you have to recognise you can’t buy their past hard work, you are purchasing what exists today and more importantly, you are buying what it can produce for you in the future.

So it’s important to stay objective, analyse what this business can really produce for you, as is, and ensure the price you pay is based on this reality.

Sure, you can choose to pay a premium if you see upside others don’t, or synergies with your other interests or your particular skill set, or some other special circumstance that provides you with the confidence of outperforming the historical results.

The Seller’s business broker will no doubt provide you with a well-presented report, showing an attractive annual profit which justifies the multiple used to calculate the purchase price.

But you will see, there are a lot of “add-backs’ included in their profit calculation. Adjustments that may be based on industry practices, but it’s important you understand them fully, because those expenses they have added back in order to produce the headline profit, were still real expenses. They were still, in most cases, real cash outgoings.

Even the ones that aren’t cash outgoings, they are nevertheless a representation of past cash outgoings or future ones, so they are not to be discounted in full.

We have our own views on what adjustments should be made when presenting a business for sale, and it pays to hear how they differ from the business broker’s views.

And all that is before we even start to consider the reality of the business’ figures presented.

And then there is the lease, the equipment, the competition, you name it.

Let’s make sure you only pay what the business is worth “to you”.

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What our customers say

Logo for Craig Wilschefski

I was headed for ATO disaster... but thanks to CapitalQ we nipped it in the bud

I know everything there is to know about the services my business provide, and I know how to do it well and how to grow my business. But I know little about, and don’t want to know about, the tax and accounting and administrative side of things. As a result I was always behind, always struggling with paperwork and administration that I never came close to managing or getting on top of. CapitalQ worked with me to get my head above water, then to streamline that side of my business and manage much of it for me. A huge weight was lifted from my shoulders, my stress levels completely subsided and life was great. The result … an unsolicited buy-out offer for my first business (which I accepted) helping to set up financially me and my family for life. I have now started my second business, and they are doing it all over again. Business profits are growing, and I am once again fighting off suitors!
Craig Wilschefski

Craig Wilschefski

Founder and Director of Home Loan Republic and Finance for Fitness

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