Guide on How to Buy a Business & Calculating Valuations in Keller, TX
There is a misconception that one can only call themselves a true business entrepreneur if they start up a business from scratch, entirely on their own, with their own ideas. This is not true. There are a lot of benefits that one can get, as well as saving a lot of time, when they decide to purchase a business in Keller, TX, instead of starting up their own.
As a matter of fact, a lot of people do choose to buy a business in Keller, TX, instead of going through the hassle of starting up a new one entirely on their own, as they find that this saves them the time, trouble and money of establishing an entirely new one.
However, there are a number of factors that you must consider before you go to a buy a business in Keller, TX. When you decide to purchase a business in Keller, TX, which was previously owned by a different entrepreneur, there can be a few complications amongst the numerous benefits.
How Do You Place Valuations in Keller, TX?
The ways through which you can value a business are several. Keeping in mind that there’s no right or wrong way to value a business, there is still a possibility that your calculation might be wrong the first few times. However, here are a few things that can help you place valuations in Keller, TX, on any business or company.
Assets of the Business
Before you buy a business in Keller, TX, take a look at the complete list of assets that the business previously owns. This includes the equipment, inventory, etc. The cost of these assets will give you a slight idea of how much the value of the business might be. It’s also advisable to take a look at the current employees and their salaries, since the greatest asset of a business is the people.
The owner of the company should have a proper balance sheet that has a list of everything that the business owns, as well as the expenditures that the business has had in the past and will have in the recent future.
However, if the company fails to provide you with an adequate list of its assets, then you might want to reconsider the thought of buying it since this will tell you more than enough about where the business currently stands when it comes to valuations in Keller, TX.
Revenue Stream
Another way, the most common one, is to calculate the value of a business by taking a look at the revenue stream of the business. For example, if a business is selling around $200,000 per annum, then the revenue stream is $200,000. Depending on the industry, most times, the value of a business is calculated at a multiple of their current revenue. Hiring a stockbroker might make it a lot easier for you as they would greatly help you understand the sales multiples of the industry.
However, don’t mistake revenue for profit. It is not necessary that a business generating yearly revenue of $100,000 is going to have the same amount of profit too. Calculating the value of a business that is not yours is not easy to do on your own.
For this reason, hiring professional business brokers in Keller, TX, might help you understand valuations in the industry that you’re researching about.
What Type of Business Should You Purchase?
Before you purchase a business in Keller, TX, it is advisable that you take a look at the entire list of assets that the business has owned since it first started up, not just to calculate the value of the business but to understand the way in which the business was run by the previous owner.
Of course, the type of business you should purchase is going to be the one that suits you and your style of management the most. But there are still a few precautions to take so you know that you’re not making the wrong investment.
So, in order to be sure that your money is going into the right place, and that this business will in fact, earn you the profit that you expect it to, there are a number of things that you should keep in mind.
- Sales Taxes & Payroll Taxes: It is crucial that the previous entrepreneur is cleared all of the dues and taxes there were to be cleared. There are a lot of people who sell off their businesses without paying their taxes and as a result, the new owner has to bear the damage before they’ve even had the chance to call the new firm their own.
- Buy the Assets: Many entrepreneurs make the mistake of buying stocks instead of the assets of the business, given that the business is a corporation or LLC. You should always purchase the assets in order to receive a much better tax treatment. Buying the assets instead of stocks also gives you freedom from any debt or legal wars, so if the previous owner does get sued, it won’t harm you.
- Indemnity: One of the most important things that you should do before you purchase a business in Keller, TX, is to get an indemnity from the seller. An indemnity is basically a written agreement between the buyer and the seller that states that the seller will pay all judgments, fees, etc., in case a lawsuit is filed after you have taken over the firm.
These are only a few of the things that you should be aware of before you purchase a business in Keller, TX. Work with a team of professional business brokers in Keller, TX, in order to avoid any complications that you might face in the future, if you happen to buy an existing business from a seller that wasn’t very honest.
If you wish to buy a business in Keller, TX, and need a team of professional business brokers in Keller, TX, on a very reasonable price, contact Kirksey Business Brokers.