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


Buying a business – not necessarily a risky business

February 17th, 2009

If you are looking for a business for sale, you can look a everything available.  You may be very interested in a particular industry but if you know that particular industry is very volatile at the moment, why would youconsider owning a business in that sector. For example, the car industry is in turmoil at the moment, GM and Chrysler may declare bankruptcy.  If you are risk averse, why would you consider buying a business that is in the automotive industry at the moment?  Would you buy a GM dealership if you know GM is going through a restructuring?  If you are an existing business, it may be an opportune time to consolidate and acquire a competitor but if you do not owned a business, and you are risk averse, I would not recommend that you look to acquire a business in the automotive industry.  Many businesses are involved in the automotive industry.  At one time 1 in 8 businesses in Southern Ontario were involved in the automotive business directly or indirectly.  This can be any business which manufactures parts for a Tier 1or 2 plant to a CNC machine shop.

 

If only a small portion of the business you are looking to buy is involved in the automotive industry, then you may not have a large risk, the business could survive even without this business.  In this case, look at the receivables from this industry, are they collectible?  Is the likelihood of losing this business great?  If so,  do not forget to change your valuations of the business, historically they received sales from a business but if that business is not there in the future, why would you pay for profits which no longer exist?


Filed under: Buying a business — Gary Landa @ 11:53 am


1 Comment »


  1. Hi,
    I like the above discussion very much.All these, above discussed helps a lot in immersing new thoughts and ideas,I am highly satisfied and oblige for this.

    kim

    Home Based Business

    Comment by kim1987 — February 26, 2009 @ 4:40 am


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