Inside Entrepreneurship: Tips for assessing the value of a business

Last week, this column featured the best business-buying practices of Warren Buffett, Berkshire Hathaway’s chief executive and chairman. http://seattlepi.nwsource.com/business/242823_schreter30.html Buffett emphasizes that he doesn’t make quick business buying decisions. He studies businesses carefully with a healthy buyer beware mind-set. He’d rather wait a long time to find one great business than leap at sexy-sounding opportunities that can falter later.

This week’s column will introduce some due diligence considerations to help two Auburn women assess the value of a retail coffee and wine shop. The stated purchase price is $750,000 including a building. At this price, the buyers also will need $100,000 from investors.

Here’s where potential buyers have to do their homework. Investors will ask tough questions about 1, the strength of the base business, and 2, whether the purchase price is low enough to give all investors and owners considerable upside. If very many of the investors’ questions are unanswered, investors will assume new management is not capable of buying a business successfully. Investors back management teams that look at the numbers just as much as they do.

By SUSAN SCHRETER
SPECIAL TO THE POST-INTELLIGENCER

Full Story: http://seattlepi.nwsource.com/business/243731_schreter07.html