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How To Investigate Any Business Opportunity
The Flow Of Decisions In a Buy-Sell Transaction
Buyers and sellers both seek answers to the same question: "What Is the business worth?" Most people
see the worth of a business as the total value of equipment and fixtures, inventory, and buildings and
land. Important, certainly, but the sum of these values does not equal the value of the business.
Bill probably paid a fair price for equipment, fixtures, and the like. But did his price of $40,000 reflect the
value of Sam's Market? Obviously not. What, than, is the value of a business?
For both buyer and seller finding the answer to this question is the most difficult and at the same time
the most important step in the buy-sell process. But this final decision reflect many other decisions made
while the transaction is being considered. In other words the buy-sell process is a flow of decisions. It
would be impossible to point out every decision that must be made, but the basic ones are as follows:
Motivation: a decision to attempt the sale or purchase of a business.
Contact: a decision on how to find a buyer (or seller) for a business with specified characteristics.
Information: a decision on What information must be gathered or given to buy or sell a business.
Sources: a decision on how, where, and at what cost the needed information can be obtained.
Analysis: a decision on the meaning, importance, and reliability of the information gathered.
Value: a decision on what the business is worth.
Price: a decision on how much money to take or give for the business.
Financing: a decision on how to pay or receive the purchase price.
Contract: a decision on the form and content of the contractual relation.
implementation: a decision on how and when to effect transfer of ownership.
Motivation Of The Seller
What leads an owner to sell his business? It may be any of a large number of reasons : a personal
health problem, a business disagreement, over-extension of the company's activities, a desire to retire
from business. The possible reasons are many and varied.