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Selling a Business?

You’re not alone. You only have to look in the “Business Opportunities” section of the daily paper on Wednesdays and Saturdays to see hundreds of business’s for sale. Buyers can pick and choose from many different types and prices. They all make a profit and are easy to run!!!! Well………some are, but how does a potential buyer recognise them?

Buyers Today

Buyers today are better educated and more generally more aware of the pitfalls. Buying a business is something they don’t do every day so the logical thing to do is to get professional help when they assess a business. This can involve the Business Broker, Accountant, Solicitor, Finance Broker, Financial Institution and Settlement Agent among others.

ROI and Goodwill

Goodwill is generally based on the expected “Return on Investment” (ROI) of a business then deducting the value of plant, equipment and stock. The balance would then be allocated as goodwill. ROI varies with different types of business’s. For example if the business above was a strong demand business such as a manufacturing or wholesale then the buyer could expect a ROI of say 30% This equates to a multiple of 3.33 (100 divided by 30). The asking price for this business then could be up to $812,000. The goodwill component would be calculated by deducting the value of the plant, equipment, fixtures, fittings etc.

ROI is a percentage and is normally expressed as range. ie 30%-60% The individual characteristics of a business would then determine the ROI used.

What Should I look for?

Well documented, well presented and organised business’s can make the decision to buy or not to buy reasonably straight forward. Look for complete financial statements for at least 2 or 3 years plus year-to-date financials for the current year. Why are they selling? Are the premises and lease suitable? Get professional advice from an Accountant or qualified person. A few dollars spent now could save you a substantial sum in the future. See our useful links for more information or if you have a particular question please email

The above business could range from $466,000 (60%ROI) to $812,000 (30%ROI)

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