If you would like to know about a "secret" way of buying any business at a significantly lower price than you normally would, then this article will show you how. There are only two things you really need to understand if you want to buy a business. 1.) The first is a profit and loss statement. 2.) And the second is a balance sheet. Neither of them is rocket science and you can learn both of them quickly and cheaply, even free, online or from taking a short class somewhere. Today, I want to talk about the balance sheet. A balance sheet is basically a document that tells us in business what the assets are, what the liabilities are, what the net worth is (or how much does the owner own), which is basically the net book value. What you really find is this is how you figure out mathematically its assets, which is the little things you can clutch the cash, the equipment, etc. We then subtract the thing called liabilities -- what you owe on these items or what you owe on the business. And then you end up with a thing we call the net worth, or how much the owner has in this business as basically a book value. Now, here's the "sexy" thing about the whole balance sheet thing: When you decide to buy the business you are looking at, the balance sheet is your secret negotiating tool. Here's why: I use the information in the balance sheet after weve arrived at a price, let's say $5,000,000 as an example, to then go back to the seller and review the business with them asset by asset. And if the assets on the balance sheet dont make too much sense, or we dont believe we want to buy them, we negotiate with the seller to have the seller subtract those from the price and have the seller keep those assets. That way, we end up lowering the amount of money we have to pay for the company. Do you see why I say this simple balance sheet is so vital to understand? When buying a business, it is sometimes the dry and "boring" stuff that gives you the most leverage and power in making the deal. |
