Forums: Discussions for entrepreneurs and small business.

Buying an existing business is a difficult task even in the best of times.  Normally you would ask to see the last three years tax returns and analize them to see if it warranted any further attention.  Type of business, location and other factors greatly affect selling price.  Also owning the business with one of the present owners might be asking for trouble.  They and the spouse that you bought out might feel as though the business is still theirs to run as they please.  Another question is will you own at least 51%.  If not, forget it.  Why not make them an offer for the whole thing?  Their is an old saying - a partership is the only ship that will not float.  

Good luck with your decision. 

A good initial offer price guideline for acquiring a company is to examine earnings multiples. Often companies are purchased based on a multiple of earnings. Sometimes the multiple is four times earnings, sometimes lower or higher. The multiple can be based on net income or earnings before interest, taxes and depreciation--EBITDA. A buyer should examine what similar sized companies have sold for and compare that to the multiple of earnings of the business for sale!

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