Business Advice : How to Take Over an Existing Business

How to take over an existing business. Acquiring an existing business can be both exhilarating
and exhausting. There are a number of ways to take over a business, however once you’ve
identified a business to take over or to purchase, the value must be assessed. One way to determine
the value of a business is to add the total expenses of the business to the cost it would
take to implement new management or annual salaries. Let me show you for example. What
we would do is take the amount of the expenses that the business has had over the course
of the year. So let’s just say it’s one hundred thousand dollars, and then the cost it would
take to implement new management, say about fifty thousand dollars. We would then add
these two together which would give us a hundred and fifty thousand dollars. But what we would
do with this, we would subtract this number from the amount of our total expenses. If
we take the one hundred and fifty thousand dollars and we’re going to subtract it from
two hundred thousand dollars, which we’re going to say is our annual income. You subtract the one fifty and the leaves
us with fifty thousand dollars, and that’s considered our free cash flow. We take then
the free cash flow of the business and we’re going to multiply it by a multiple of about
five. So here we have fifty thousand dollars of our free cash flow which we multiply times
five, and the multiple can be anywhere from three to five, but it’s good to use five.
So that’s going to give us two hundred and fifty thousand dollars. This then becomes
the amount that we are actually going to sell the business for or what we can purchase it
But let’s look at another example. Say that our annual income is not two hundred thousand
dollars. Let’s say that it’s a hundred and twenty five thousand dollars, which then means
we’re going to have a negative cash flow position. We’re actually going to be at a negative twenty
five thousand dollars. This means that we shouldn’t base this sale on for free cash
flow, and we should look at an asset only purchase. In most instances, an asset purchase
is recommended. This avoids the purchaser assuming any unknown liabilities of the existing

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14 thoughts on “Business Advice : How to Take Over an Existing Business

  1. It really is helpful for those who want to sell their business. I just want to inform that if anyone wants to sell their existing business they can visit our website.

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