Eric Siu walks through nine factors to evaluate before buying a business: profit, revenue, profit margin, industry, location, whether you'll run it or invest passively, how you'll finance it, if it's a platform acquisition or standalone, and whether it matches your skills. He uses a $100K annual profit example to show what to look for.
A couple things. One, you want to look at profit. How much does the business make? So for me, let's say that's $100K a year. You want revenue. So how much revenue does the business do overall? You want profit margin, byproduct of the two, basically, to understand what sector or what percentage you're comfortable with. You want sector. So marketing, accounting, landscaping. You want geography. How close is it to you if it's not a remote business? Is this a business that you're going to own and operate or be an investor in overall? You want financing method. So are you going to seller finance this? Are you going to use an SBA loan? Are you going to use cash for this business? Is this a platform acquisition? So you're going to just buy this as the first company and then add on, or is this a one-off business? And does this fit your unique skillset, yes or no? So I guess there's, what is that, 9 of these that we try to make sure we have a range on. Everybody's is different, but you want to stay in your range as much as humanly possible. Right.
