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Vitality measures to consider when buying or selling businesses

On Behalf of | Jul 28, 2017 | Buying & Selling Businesses |

In many cases, North Carolina entrepreneurs make the decision to purchase a business without looking at all the necessary data. New buyers and sellers may want to follow the path of professional investors, which involves focusing on what are known as key performance indicators.

The first step is in understanding that some KPIs are specific to the sector a business operates in. In other cases, certain indicators won’t matter to that particular business and still others can be applied generally across all businesses. These latter KPIs can be considered the vital signs that help an entrepreneur understand when capital return can be expected from the investment. The price when buying or selling businesses will largely represent the vitality shown in KPIs.

An example KPI here is the cost of acquiring what is one of the most important of business assets, new customers. This is a dollar amount representing marketing and sales outlays divided by new customers. For a business embarking on a new advertising campaign, the figure may represent costs over a shorter time period.

Potential buyers could also consider many other metrics, such as the profit margin and customer retention rate. However, even a solid operation can pose serious risks for North Carolina investors. As with other large purchases, buyers should perform diligent background checking on the assets and liabilities, protect themselves from potential legal issues and ensure the purchase provides what is necessary for success. Having an attorney oversee business transactions from the start could result in a safer and more satisfying experience as an entrepreneur.

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