[berettafan]

Originally Posted by cashflyer

My business partner is looking at a company that is for sale.
Asking price is $1.8m

Net profit last 5 years are:
$125k, $175k, $169k, $189k, $153k

One owner/FT employee, one hired FT, one hired PT.
Hard assets (equipment) value is ~ $620k
Facility is leased, long term, assumable.
Business is all word-of-mouth, website, walk-in. No contracts.

In my thinking, the company is overpriced.
A) If you liquidated the assets, you still have $1.2m of debt. So the cost is not fully collateralized, and it will be hard to get a loan.
B) If you do get a 15 year business loan for the $1.8m, your loan payments would equal or exceed your profit - meaning you would be n the red all the time. IF you can inject cash for 15 years, then one day you hopefully start making a profit.

Am I overlooking something / anything?
Or am I correct to advise him to cut this fish loose?

Email me last 3 yrs tax returns and I'll give you 30 min of free education on this (I in turn feel I've contributed to the bird community and earn the right to continue posting) I do a fair amount of small bsns valuations in my work.