密歇根大学创业管理5 Buying an Existing Business概要1.ppt

What are the advantages and disadvantages of buying an existing business? MGMT 388Professor Elizabeth Sikkenga Buying an Existing Business Class Goals To discuss the positives and negatives of buying an existing business To look at how the value of businesses is determined To learn the most important factors to consider when considering buying a business Questions to Consider FIRST Is the right type of business for sale in the market you want? How critical is experience in this business, and do you have it? What is the business’s potential for success and growth? What changes will you have to make to realize the potential? What price and payment method is reasonable for you and the seller? Will the company generate enough cash to pay for itself? Would it be better to start a business from the ground up? Advantages to Buying a Business Continued success May have the best location Employees in place Suppliers in place Equipment in place Inventory and trade credit established Previous owner’s experience Easier financing May be a bargain Disadvantages to Buying a Business May be a loser May have the wrong location Employees may be unsuitable Suppliers in place Equipment may be obsolete or inefficient Inventory may be stale Previous owner may have created ill will Accounts receivable may be worth less than face value Change and innovation may be hard to implement May be overpriced Valuing Accounts Receivable Age of Accounts (days) ? Amount (Face Value) ? Probability of Collection ? Value ? 0-30 31-60 61-90 91-120 121-150 151+ ? Total $40,000 $25,000 $14,000 $10,000 $7,000 $5,000 ? $101,000 .95 .88 .70 .40 .25 .10 $38,000 $22,000 $9,800 $4,000 $1,750 $500 ? $76,050 ? ? ? ? Due Diligence Examination of Seller by Buyer (and vice versa) All legal documentation Including potential lawsuits All tax documentation Returns for 3-5 years previous All accounting statements Balance sheets and income statement Minutes of executive board meetings “Reps” (representat