The most surprising aspect of this chapter for me was the checklist for analyzing a business and the due diligence process. I didn't realize the amount of questions and sections of a business that must really be taken into a business before deciding to purchase or pursue that venture. It went for several pages in the text and was rather extensive which honestly shocked me.
The only real vocabulary word of the chapter that was a tad bit confusing was the term undercapitalization. I think the definition is a little unclear and doesn't really help to define what the terms means in how it relates to analyzing a business.
One question I have pertaining to the text is in regards to due diligence. It seems to be a very formatted formula with step by step categories and questions that help evaluate a business. The question I have pertaining to this concept is about the formula. Is the one provided in the text one that is used by most people in order to evaluate a company or does it vary based on the company and business being evaluated? Obviously financials are important to all aspects of the business but the intangibles differ based upon the service or product the business offers.
The second question I have relates to the avoiding start-up costs excerpt of the chapter. The section states that some buyers will pay more for a business than the value it truly is because they are trying to avoid the start up costs of a new business. My question is how does this make sense? How can you put a price on the amount of exposure and the reviews a business has already garnered in comparison to the cost it would be to start this fresh? That seems like a difficult cost to estimate and I would like to know the method they would use to estimate these costs.
This chapter on valuing entrepreneurial ventures was very detailed and provided a lot of good information. After reading the chapter I don't think there was anything that author was incorrect about due to the explanations that were utilized throughout the chapter.
No comments:
Post a Comment