This article are provided for information purposes only, and are not intended as legal advice.

Buying a business – equipment

November 15th, 2008

It is important to look at the condition of the equipment.  This will give you an idea how the owner operates his or her business.  Does the owner strip out cash out of the business, does the business have cash flow problems, will the equipment need replacing just after you close the sale of the business?  For example, significant repairs are required in automobiles after 5 to 7 years of ownership.  The repairs will increase as the equipment ages.  If the equipment has been maintained on a regular basis, it will need less repairs in the future in any one year, if all goes well.

What is the replacement cost of the equipment?  I had a client who purchased a business which had a lot of aluminum tanks abandoned in the property. the sale of the tanks for scrap aluminum was considerable and this helped reduce the effective purchase price of the business.

Filed under: Buying a business — Gary Landa @ 9:33 am

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