If your business is suffering from insufficient operating profit, this will affect your asking price. Reevaluate the business to find the reasons for the lack of profit. You will need to look at many potential problem areas.
* High inventory
* Unnecessary personnel
* Employee benefits
* Inadequate collection efforts
* Owner compensation too much
* Personal bills too heavy for the business to carry
* Rent increase cannot be accommodated
* Too many locations for the business to handle
* Improper margins maintained for selling purposes
* Older equipment no longer state of the art
* New competition in the marketplace
* New price structure for retail customers
* Theft by personnel of goods or money
* Maintenance costs or service contracts too costly.
You can treat the problem in several different ways depending on the diagnosis. The following examples will give you a good start in finding where your business' problems lie.
* Do an immediate analysis of the profit and loss statement to find the specifics of the problem. Compare the statement to prior years and months to find out if the problem is connected to seasonablity or another more permanent change.
* Reevaluate the industry to determine if the problem is industry-wide or specific to your particular business. This evaluation will tell you whether the problem you face is singular to your management or whether the industry is facing a more generic problem.