Q:

How much should you pay for a business?

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Quick Answer

As there as many different factors to consider when purchasing a business, there's no fixed or ideal price to pay. Making an offer for a business is an exhaustive process because there's much research needed to be completed before pitching a takeover proposal. Paying for existing businesses can be a safe option because there are fewer risks involved than starting from scratch.

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How much should you pay for a business?
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Full Answer

After completing the research process and deciding on a firm to buy, it's important to set some ground rules for the negotiation stage. Per Canada Business Network, knowing an upper price limit beforehand is critical for not going over the budget. However, at the same time, some flexibility should be involved if the business owner refuses to budge from his original asking price.

Valuing the assets of the business is a key component for deciding the value of the overall firm. The financial statements of the firm should be scrutinized to ensure no surprises are in store for later. Furthermore, as the customer is key to the brand, sounding out the opinions of key customers helps in determining potential future options. Talking to clients of the firm is also a great way to understand the interactions between all these key players. Finally, it may also be wise to get a lawyer to double check the contract before signing on the dotted line.

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