Forums: Discussions for entrepreneurs and small business.

There is a small manufacturing business that is for sale that I am interested in.  The person that is selling the business bought it a couple of years ago but did not do much with it (they had family & personal issues) and now wants to sell it.The item that was produced was sold to end users, where I would like to produce and sell wholesale to stores etc (I believe that was the bulk of the original owners business).   How do I put a value on it?  Apparently the original owner did quite well with it (at least that is what I am being told).  I have no way to contact the original owner.  What do you think?

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I would agree with Nick that you need to have proof that the business is actually generating sales and turning a profit. Reviewing historic tax filings would be the first place to start.

Does the company have any patents or intellectual property on the goods they produce? That is often an overlooked part of a manufacturing company. Also, review the condition of the machinery. What is the depreciable value of these assets over the next 3, 5 and 10 years.

My main concern would be not having the option of contacting the current business owner. Before I invest in or purchase a company, I always sit down with the current owner at least once or twice. In most cases I require the current owner to provide support for a month after purchasing the business, as his insight is crucial during the transition process. What if you have questions during the first month or two of taking over the company? Who will you consult?

I would advise you to get in touch with the owner prior to making any offer on the business.

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As clarification, I can speak to the current owner (who says they did not do much with the business due to family issues (supposedly) but don`t get adequate information as far as yearly sales etc.

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