I still remember the first bad financial decision I ever made. My seven-year-old buddy told me that if I lent him a few dollars, he would pay me back ten a few weeks later. Unfortunately, he forgot all about his debt, and I was left without my allowance. Although it might seem like a silly example, bad financial decisions like that one plague adults everyday. I have had my fair share, and so I decided to create a blog dedicated to helping you to invest your money properly. Before you take your hard-earned money and throw it at a cause, think about the advice on my website to make a great decision.
If you are a professional and you are thinking about buying out another person it is very important that you go about the right process to do it. Much like purchasing a house, buying someone's business is a very complicated process. Here are some things that you need to know about purchasing someone's business.
1. You Must Get The Business Evaluated
The first thing that you need to do is determine just how much the business is really worth. Someone might ask you to pay 1 million dollars for their dental practice, but you don't really know if it is worth it. Thus, the person will start by listing their business for a certain price. Then it is us to you to bring in a professional who is trained in valuing businesses to come and tell you what it is worth.
When this person comes in they will go through a very thorough process to determine if the business is worth what the person says it is worth. The evaluator will look at their tax returns for the last decade. They will see how much money they really bring in. They will look at how many clients they have, then they will determine just how much of overhead the business must carry and any other expenses. After this thorough investigation, the evaluator will let you know what the business is truly worth and what you should spend.
2. Determine How To Pay For The Business
If after you have the business evaluated you decide that it in fact is what the person says it is, and you choose to purchase it, you can actually go about buying it in different ways. In some cases you will get a business loan from the bank, much like the loan that you would get on a house, and pay this loan off. You then make payments on the loan every month, just like you do for your house or for your any other long-term loan. Or if you choose not to take out one big sum from a bank, you can negotiate giving the owner a certain amount each month and year. For instance, you might give the person 10% of your business earnings for a number of years. That way the person still has income and you don't have to pay it all at once.
These are just a couple things you should know about buying someone's business.
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