The physical nature and environment of a business can be analysed by investigating the business issues around:
- Its position (location, industry, demography and economy);
- Its Assets (Plant and Equipment, Fixtures and Fittings and Capital Invested);
- Its Activities (products, customers, supplier, competition and compliance); and
- Its Management (organisation, policies, systems and procedures).
Without the physical nature of a business being investigated, the risks to the future profits cannot be judged well. Using financial information assumes the past will be repeated into the future, hardly a reasonable assumption.
In my view, the vast majority of business offered for sale seem to be priced using mainly financial information. The result is most businesses are overpriced and are never likely to be sold.
If you want your business ‘priced for sale’ talk to me.
Graham Long 2019