Canadian wants to know how to value a business - ask a

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This answer applies to any business in any country.  It is not Canadian Specific.
QUESTION: I like all answers which are very usful to me. Can i ask a question about business evaluation. The asking price is $600,000 with a net profit of $200,000. The business has been establised over 10 years. From past ten years, each year was profitable with a retained earnings of $400k. Do you think it is worth to pursue this business? Thank you!
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Having been involved in the valuation of a couple of hundred businesses over the years, I should be able to answer this question with my eyes closed.
However, without knowing what the business does, without knowing what the present owner is going to do if you buy and without knowing the loyalty of the client to the business itself, I do not know. What are the retained earnings composed of?  Why is the owner selling?
For instance, I understand that H & R Block has closed some 24,000 out of 32,000 offices in the last two years. With efile, telfile, and another dozen methods of  filing an income tax return electronically, the business of tax preparation has been a sunset industry.
Corner service stations have been closing right left and center.  Ma and Pa corner stores, drug stores and general stores have been disappearing under the competition of big box stores.  60 year old Sign painters with a paint brush are been displaced by 19 years olds with $6,000 worth of computers, printers and cutters. 
Small computer stores pay more for their parts wholesale than places like Future Shop sell retail.
I used to teach a course on leveraged buyouts of businesses.  The  business never sold for the asking price.
You need to consult a firm like BlairCrossonVoyer who function as business valuators. They can be found at 
1650 Commerce Place . 400 Burrard Street . Vancouver . British Columbia V6C 3A6
Telephone 604.684.3371 . Fax 604.684.9832 . Email [email protected]
Obviously, they are competitors to myself but will or can give you an independent valuation.
Last, but not least, if the business interests you, you should pursue it.  However, the parameters you gave me would not be the reason.
David Ingram's US/Canada Services
US / Canada / Mexico tax and working Visa Specialists
US / Canada Real Estate Specialists
4466 Prospect Road
North Vancouver,  BC, CANADA, V7N 3L7
Res (604) 980-3578 Cell (604) 657-8451
(604) 980-0321 
New email to [email protected]
www.centa.com www.david-ingram.com
Disclaimer:  This question has been answered without detailed information or consultation and is to be regarded only as general comment.   Nothing in this message is or should be construed as advice in any particular circumstances. No contract exists between the reader & the author and any and all non-contractual duties are expressly denied. All readers should obtain formal advice from a competent financial, or real estate planner or advisor & appropriately qualified legal practitioner, tax or immigration specialist in connection with personal or business affairs such as at www.centa.com. If you forward this message, this disclaimer must be included."
Be ALERT,  the world needs more "lerts"
This from "ask an income tax and immigration expert" from www.centa.com or www.jurock.com or www.featureweb.com. Canadian David Ingram deals daily with tax returns dealing with expatriate:
multi jurisdictional cross and trans border expatriate problems  for the United States, Canada, Mexico, Great Britain, the United Kingdom, Kuwait, Dubai, Saudi Arabia, South Africa,  Thailand, Indonesia, Egypt, Antarctica,  Japan, China, New Zealand, France, Germany, Spain, Italy, Russia, Georgia, Brazil, Peru, Ecuador, Bolivia, Scotland, Ireland, Hawaii, Florida, Montana, Morocco, Israel, Iraq, Iran, India, Pakistan, Afghanistan, Mali, Bangkok, Greenland, Iceland, Cuba, Bahamas, Bermuda, Barbados, St Vincent, Grenada,, Virgin Islands, US, UK, GB, American and Canadian and Mexican and any of the 43 states with state tax returns, etc.
  Alaska,  Alabama,  Arkansas,  Arizona,  California,  Colorado, Connecticut,  Delaware, District of Columbia,  Florida,  Georgia,  Hawaii,  Idaho,  Illinois,  Indiana,  Iowa,  Kansas,  Kentucky,  Louisiana,  Maine,  Maryland,  Massachusetts, Michigan, Minnesota,  Mississippi,  Missouri,  Montana,  Nebraska,  Nevada, New Hampshire,  New Jersey, New Mexico,New York, North Carolina,  North Dakota,  Ohio,  Oklahoma,  Oregon. Pennsylvania,  Rhode Island,  South Carolina,  South Dakota, Tennessee,  Texas,  Utah, Vermont,  Virginia, West Virginia, Wisconsin, Wyoming, British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec City, New Brunswick, Prince Edward Island, Nova Scotia, Newfoundland, Yukon and Northwest and Nunavit Territories,  Mount Vernon, Eumenclaw, Coos Bay and Dallas  Taxman and Tax Guru Your name has been added to our email list because of an enquiry we have received,  we may not answer your question but 
another similar question will be as we lump them.
You may find more answers at www.centa.com
David Ingram of the CEN-TA REALTY  Group
US / Canada / Mexico tax and working Visa Specialists
US / Canada Real Estate Specialists
108-100 Park Royal South
West Vancouver, BC, CANADA, V7T 1A2
(604) 980-0321 - Fax 913-9123 [email protected]
www.centa.com www.david-ingram.com
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