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© Copyright 2002-2003. All rights reserved.
Page 31
How To Investigate Any Business Opportunity
Bill had enough information available to know 
(1) that his sales expectations were too optimistic, and 
(2) that even if he reached his sales goal, he would not be able to satisfy the cash demand on the opera-
tion. 
What happened could have been predicted.
Analysis and Due Diligence
The word "predict" is important. The buyer should be able to follow through the steps listed below and
predict with some confidence the future of the business.
·
What factors affect sales?
·
How will these market factors behave?
·
Therefore, what sales can I expect? 
·
What makes up the cost of sales?
·
How will these cost factors apply to expected sales? 
·
Therefore, what gross profit can I expect?
·
What expenses are required to run this business? 
·
How will expenses develop under my ownership? 
·
Therefore, what net profit can I predict?
·
What assets will the business need and possess? 
·
What is the condition of these assets? 
·
Therefore, what asset improvements will I have to make?
·
What credit does the business assume?
·
What is the condition of the credit position? 
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