LO 6.1 Compare the advantages and disadvantages of buying an existing business. 

to doing business with it, and you will break even sooner than if you started from the ground up. The disadvantages include the difficulty of changing the business’s image or the way it does business, outdated inventory and equipment, too high a purchase price, poor location, and liabilities for previous contracts.

LO 6.2 Propose ways of locating a suitable business for sale.

Newspaper advertising is one source for finding a business for sale, and word of mouth through friends and family may be another. Bankers, lawyers, accountants, real estate brokers, business brokers, and Small Business Administration representatives can be other good sources.

LO 6.3 Explain how to measure the condition of a business and determine why it might be offered for sale.

Profitability, profit trends, comparison of operating ratios to industry standards, and total asset worth are all measures of the financial health of a business. There are as many reasons for selling a business as there are businesses to sell. As a prospective buyer, you must cut through what is being said to determine the reality of a situation. You must develop an ability to analyze a market and estimate potential profits and worth.

LO 6.4 Differentiate between tangible and intangible assets, and assess the value of each.

The advantages of buying an existing business include the fact that it is an already functioning operation, customers are used Tangible assets are those that can be seen and examined. Real estate, inventory, and equipment are important tangible assets. Intangible assets, though unseen, are no less valuable. Goodwill; leases and contracts; and patents, copyrights, and trademarks are examples.

LO 6.5  Calculate the price to pay for a business.

The offering price to pay for a business is calculated by adding the adjusted value of tangible assets to the value of intangible assets (including goodwill, if appropriate).

LO 6.6  Discuss factors that are important when finalizing the puchase of a business.

Once the price of a business is agreed upon, the terms of sale need to be negotiated—including setting up installment provi-sions and thinning of the assets. Before the closing date, the buyer puts an agreed-upon amount of money into an escrow account.

LO 6.7  Describe what makes a family business different from other types of businesses.

The two primary differences between family businesses and other businesses are the complex interrelationships among family members and their interaction in the business, and the intricate succession planning needed.