Sunday, October 9, 2016

How to we evaluate buying PART of a business? How to Buy a Business

I received a question from one of my viewers in South Carolina.  Ben has an opportunity to buy part of a business and wants to know what he needs to do to figure out what it’s worth.

Splitting up businesses is a funny thing.  Usually businesses want to combine to realize synergies. 

Think of two companies merging and eliminating some of the administrative staff.  The result of the merger should be lower overheads as a percentage of sales.

I made this video to discuss what happens when you start splitting things up:

So if you buy part of a business and this leads to dis-synergies how do you figure out what a part of the business is worth?  Well, all you can rely on is the sales figure.

Start by taking the sales of the existing company for the department or product lines that you’re going to be acquiring, then build yourself a new income statement.

Be prepared for a tough negotiation though, the parts may often be worth less than the whole and the sellers expectations may be very different from yours.

For a full education and help on buying a business, visit

To learn how I can help you sell your business yourself, visit

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Do you live in the Maritimes?  I’ve got workshops coming up on buying and selling businesses in the fall.  Book now

Thanks and I’ll see you next time. 

1 comment:

  1. I was more talking in general terms without referring to those examples. In terms of non operating assets/liabilities I was indeed thinking about investments in other firms but also such items as deferred taxes, pension assets/liabilities. Great posts by the way. Thank you
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