How much should I pay for a business ?

You can determine market value by collecting data on similar businesses in the area.

The actual value of a business is usually determined through a combination of:

1. The value of the assets: book value and/or replacement value
2. The earnings potential – over the past five years

However, regardless of the ‘science’, each business will have a number of unique features that can influence the asking price, including:

1. Location
2. Reputation
3. Exclusivity in the marketplace
4. Quality of management

It is very important to remove as much emotion from the business buying decision. You and your partner might fall instantly in love with the location of a property or with a romantic notion of becoming a tourism operator. The romance will soon sour if the decision is not based upon sound commercial principles.

The evaluation and purchase of a business is something that should be done in conjunction with an accountant and/or a business advisor. The purchase of certain types of tourism and hospitality businesses can often be organised through specialist brokers. The relevant tourism industry association will be able to advise on suitable brokers to use.

Click here to find out more about what is the value of a business.

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