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Page 32
How To Investigate Any Business Opportunity
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Therefore, what changes, if any, can occur in the debt structure?
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How much cash do I have?
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How much cash will the business generate?
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Therefore, what will be my available cash position?
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What immediate cash outlay must I make?
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What will be the cash needs of the business?
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Therefore, what cash outgo will be necessary?
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What will be my net cash position as things now stand? 
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What additional cash resource, if any, must I have? 
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Therefore, what financing plan shall I use?
Valuing A Business Opportunity
A business has a purpose. That purpose is to provide a satisfactory return on the owner's investment.
Consequently, determining value involves measuring the future profit of the business being sold.
A seller often thinks of value as representing the money he has invested through his years of ownership.
A buyer is tempted to consider value as a fair price for tangible items such as equipment and inventory.
These factors are important, but they have value only to the extent that they contribute to future profits.
An owner may have invested $40,000, the tangible assets may have a current worth of $20,000, but it is
the profit potential that establishes the value of the total business.
Assuming that a reliable estimate of future profit is made, how much is to be paid for each dollar of profit
potential? This computation is discussed later in this section, but the general approach is suggested by
the following questions:
What am I buying (or selling)? A business, or a building full of equipment and inventory?
What return would I get if I invested my money elsewhere - in stocks, bonds, or other business opportu-
nities?
What return ought I get from an investment in this business?
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