In Real Estate they say Location, Location, Location! Meaning that location is everything.
But in business brokerage we do not concern ourselves much with location. We judge businesses primarily by their financial performance. A profitable business in a bad area is more valuable than a money losing business in a hip part of town.
This is because the effects of good or bad location are already factored in to the business’s performance. Of course a buyer might decide that a particular business would do better in another area of town. But future possibilities belong to the buyer. In pricing a business for sale we look at past performance as a guide.
I often encourage buyers to look beyond location and instead examine the performance and potential of a business. At the end of the day past performance and future potential should be the critical factors in your decision to purchase a particular business.
The Author Anthony John Rigney is a Business Broker and Board Certified Intermediary in Jacksonville Florida. He is the Owner and Founder of Quorum Business Advisors.