Resort Maps - Business Acquisition - Case Study Example

In addition, the background research reveals other issues, for example, the transfer fee of $5,000 to the franchisor, human resources, customer payments, business risks, and mode of ownership which will help in making the decision. Question B I would use the net present value methodology to determine the valuation for Breckenridge business. This is because the net present value methodology is helpful in assessing the success of the business. The net present value methodology will illustrate the definite change in the value of Breckenridge business as a consequence of taking on the business.

This means that approximating the current value of Breckenridge business and anticipated profits from Breckenridge business I can evenly evaluate the financial outlook of the business and a sensible decision can be reached as to whether business will be profitable to consider pursuing. I would not need to carry out further research. There are several ways I would go about when preparing to make an offer. One, I would see a business broker. A business broker will give sound advice regarding the transaction.

Two, I would talk to the clients of the business to get a feeling of the business. Three, I would talk to the owners to gain more information about the business and the reasons for selling. Finally, I would make an offer while negotiating the most suitable deal. Question C I would be willing to invest $130,000 to purchase the Breckenridge business. My basis for this decision is that there will be an extra $5,000 which will be charged to act as franchise fee payable to the franchisor upon the sale of the business, per the terms of the franchise agreement.

This will also be close to the stated price of $150,000. Nonetheless, that price is fair as I will not be guaranteed that the business will enhance the price of advertising, consequently, adding more money to the bottom line. There are two conditions which I would place on the deal. One, I would demand for compensation if the level of customer satisfaction does not lead to a rise in price of advertising by $100 per space, adding more than $10,000 to the bottom line as projected. Two, the owners should offer adequate information regarding the marketplace status so as to help cement the business’ position.

Question D My first offer would be $120,000. My rationale for that number is that despite the extraordinary customer satisfaction and anticipated related increase in the price of advertising, the cost of functioning over the years may have gone up and the prices of competitors may have gone down, increasing expenditure and lessening earnings. There should be significant flexibility in the negotiations. This will help in the continuous evaluation of what may be attained and what may not be workable.

Also, the negotiations will have different environments and different individuals, hence the need for flexibility. Question E I would finance the acquisition in several ways. First, I would use family. Family members may provide or loan the entire amount or down payment that is required. Second, I would use the SBA, via its official lenders who offer business acquisition loans. Finally, I would utilize personal funds, for example, cash savings or other investments. I would personally invest $80,000.

I would not consider joining up with an investor or