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How To Investigate Any Business Opportunity
Seasonal fluctuations. All businesses are affected to some extent by seasonal variations in the de-
mand for goods or services, These variations may be the result of numerous factors - buyer motivation,
weather, specific events. Their nature, causes, and extent should be identified as fully as possible.
Some are reasonably predictable; others are not.
All businesses are affected to some extent by seasonal variations in the demand for goods or services,
These variations may be the result of numerous factors - buyer motivation, weather, specific events.
Their nature, causes, and extent should be identified as fully as possible. Some are reasonably predict-
able; others are not.
The prospective buyer of a business should think in terms of completing the purchase just before the
maximum seasonal peak of the company. This will give him the greatest possible short-term gain and
return on investment. Buying a business immediately after the maximum seasonal peak puts an addi-
tional burden on short-term working capital.
The seller is likely to take the opposite view. He is most likely to want to sell immediately after the sea-
sonal peak of the company, thus realizing the best possible profit. (It is assumed here that time in rela-
tion to sales peaks and valleys would have no appreciable effect on the market or replacement value of
assets other than merchandise.)
Cyclical fluctuations. Cyclical fluctuations are changes that occur over a longer period of time but tend
to appear somewhat regularly. Periods of depression and prosperity will obviously affect the future of a
business. The major difficulty is to determine what effect such fluctuations will have on the businesses
being bought or sold.
Cyclical fluctuations are changes that occur over a longer period of time but tend to appear somewhat
regularly. Periods of depression and prosperity will obviously affect the future of a business. The major
difficulty is to determine what effect such fluctuations will have on the businesses being bought or sold.
Long-range trends. Long-range patterns of change in an industry or a given business fall within this
classification. The interplay of forces creating such trends is extremely complex, but the buyer in particu-
lar should be alert for changing patterns in his industry or market that are likely to affect the future of the
business. Long-range patterns of change in an industry or a given business fall within this classification.
The interplay of forces creating such trends is extremely complex, but the buyer in particular should be
alert for changing patterns in his industry or market that are likely to affect the future of the business.
Questions in the Analysis of Sales
1. What has been the year-to-year change in dollar sales?
The length of time to use is largely a matter of judgment. If the figures are later to be used to make pro-
jections, a 10-year period or more is not unreasonable if the company has been in business that long.