More Business Broker Advice for Experienced Business Buyers
Posted on Sat, Mar 06, 2010
In the previous post, we began a conversation about how even experienced buyers who have great familiarity with the process of buying a business need to perform rigorous analysis in support of every transaction. Regardless of how much experience they have with buying a business, there are areas where a business broker can assist a buyer in performing due diligence in order to uncover the areas where intentionally or unintentionally, a seller may have obscured the reality of the value of their business.
CASH FLOW STATEMENTS are another such area that must be carefully scrutinized, because for a buyer they are more important than either balance sheet or income statement. The buyer needs to certify that the cash flow will continue to remain positive even after having taken into account the debt service that will be necessary after the acquisition and once the non-recurring or extraordinary items have been removed.
The ability to continue producing positive cash flow is dependent upon the condition and reasonable future lifespan of the machinery and equipment of the business. Should CAPITAL EXPENDITURES become necessary to replace equipment that is dilipidated or will become obsolete in the near term, a buyer needs to know that in order to assess its impact on the acquistion price and the ongoing operation. Rapidly growing companies may also continue to need capital investments in productive capacity that exceed the normal rate of depreciation, which would have an impact on both future projections and acquisition price.
We invite you to visit the experienced buyer page in the resources section of our Web site for more information on all aspects of buying and selling a business in Tucson or Southern Arizona.
If you'd like more information on this subject, please contact us at 520-327-4454 or visit us at www.allenandyoung.com