I have a cashflow question?

Question

if i purchase a business for 75,000 dollars. It generates 492,000 dollars in gross income and has a

cashflow of 75,000 dollars, is this a good purchase? By the way im purchasing with cold hard cash and will not need to finance anything.

Answer 1

on the surface it appears to be a great buy.  BUT, what if all of the company's sales are generated by teh guy who just sold you the company, and now he's gonna set up across the street and compete with you?  Did you guys sign a NonCompete Agreement?   if not, that was a big mistake.

but generally speaking, businesses are ususally sold at a multiple of cash flow, often 4 - 6 times EBITDA.   So say your EBITDA is $75K, then you obviously got an amazing deal.  but that's make me skeptical.  what was his motivation for selling?  how sustainable are the revenues?  any contracts w/customers exist?

did you do your due diligence?  how do you know that his numbers are accurate?  are his financial statements audited?

there are a lot of question marks here...