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Physical Condition of the Business? 3. Continued Market for Products/Services? 4. Customer Base? 5. Competition? Overhead 52 Small Business Management Screening the Deals Preliminary: Visit, inspect, interview. Quick look at marketing, finances, and inventory. Second Stage: Examine the value of the investment. Facilities Financial Ratios Ownership What are you buying? Capital Required Personnel Market Niche Final Screen: Do a business plan. Small Business Management HOW MUCH IS IT WORTH? 1. Book Value 2. Replacement Value 3. Liquidation Value 4. Past Earnings 5. Cash Flow Small Business Management Valuing Assets Intangibles Image and reputation with suppliers, customers, and bankers. Any negative things to be overe? Importance of skills and relationships of owner and/or key employees. Physical Assets True value of equipment and fixtures. True value of inventory. Small Business Management Legal Problems 1. Legal encumbrances: Mortgages, liens, judgments, zoning, environmental, etc. 2. Patent, trademark, or copyright problems? 3. Title to land and buildings? 4. Access and parking? 5. Existing buy or sell contracts? 6. Licenses? 7. All debts paid? Small Business Management Pricing the Business Assets Book, Cost, Market, Replacement? Goodwill Earning Power Multiple of Revenue or Profit Small Business Management DETERMINING THE PRICE ? Book Value ? Replaceme