So many times when people are looking to buy a business. Whether that is a sign company, a school, or a apartment building ( yes…apartments are business, they just come with buildings and real estate to make them work). The investor focuses on the past performance. Which is good to know but as the TV ads for everything from weight loss to mutual funds say “past performance is no guarantee of future performance!”
First, indeed do check to see if the performance has been solid and consistent. Have there been any changes recently? Different marketing? Client mix change? If so why?
Second, what is the current and possibly the future market doing? Is there a growing/diminishing need? What key indicators drive that need? What is the industry standard performance both nationally and in the market you are purchasing?
Third talk to financial institutions you have a relationship with. Do banks like this industry? This area? How do they access risk in this industry? You do not have to go with their input but remember they only make money by getting their money back so they have some pretty sophisticated tools.
Finally, remember in any business nothing is guaranteed but you are more likely to succeed if you surround yourself with the best people possible and like any professional NEVER stop learning your craft!