Читать книгу Finance & Grow Your New Business - Angie Mohr - Страница 24

Once you have taken into consideration your personal goals and your tolerance of risk, the decision to buy versus build a business comes down to a financial one. There are many ways to analyze a purchase decision, but we will look at the most common: the discounted cash flow method.

Discounted cash flow analysis (DCF) helps us to look at a purchase decision and figure out at what point our cash inflows (revenue) match and then exceed our cash outflows (operating and financing costs). DCF takes into consideration the important fact that the timing of the inflows and outflows of cash are different. A dollar received three years from now is worth less than a dollar that we have to spend today. This is called the time value of money and is the basis of DCF analysis. For more information on cash flows, please refer to Financial Management 101, the second book in the Numbers 101 for Small Business series.

Let’s look at an example to see DCF in action:

You have been offered the opportunity to purchase a sign-making company for $225,000. You have already talked to your bank manager and she is willing to finance $175,000 but you will have to use $50,000 of your own savings to finance the rest. You have been thinking about starting up a similar type of company for some time and you want to compare the cash flows of purchasing an existing business versus building one from scratch.