The attraction for people to buy a small business is obvious. The amount of small business marketing and the cost is small compared to the middle-market business.
People generally anxious to start their own small business, the level of financial input and time to put in a business can be far greater than imagined. At least 50% of these types of businesses fail with the majority not get passed the first 2 years. The odds are better for people to gain the franchise; However, it has to keep in mind to royalty payments of 10% must be met annually.
One of the many problems acquire a small business can be the asking price. Many small business owners are not sure how to properly valuate companies. . Using mythical formulas or “sweat equity” based on how much work has been put in is totally useless
To assess small business this is a good guide is;
retailers 30% of annual sale
services 60% of annual sales
Distribution company 35% of annual sales
production company, 50% of annual sales
course, these are accompanied by in fact, business value is only really worth what you are willing to pay for it. Other items are: cash, assets, growth potential and risk. The terms and conditions of the lease, state machines and how many workers are employed, list is really endless.
In short, before even contemplating acquiring a small business, you must understand that the failure rate is very high. Proper research, good timing and a good amount of luck should help your business being one of the success stories.
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