SITUATION
Growth prospects have never been brighter for this 22-year-old manufacturer of custom-designed skylights, which has grown to more than $2 million in annual sales by letting light into homes, museums, symphony halls, upscale commercial buildings, and more. The California company ended last year with its strongest sales quarter since its current owners bought the business in 1995. Some 60 percent of its revenues come from jobs within California, where construction has remained steady throughout the economic downturn. Furthermore, the energy crisis has driven up demand for skylights, which pay for themselves in energy savings. The manufacturer's state-of-the-art products also protect furniture and carpeting against fading from sunlight.

The owners of the business are selling because they intend to move overseas. Their 22 staffers, including two installation crews and four sales and marketing professionals, appear willing to stay and help a new owner "illuminate" a variety of new growth opportunities. The asking price is $675,000, with 60 percent down. The owners will consider financing a portion of the deal.

Question 1 Should a prospective buyer of this firm investigate other possible reasons why the owners might want to sell? Why or why not?

Question 2 What sales and revenue numbers are needed to evaluate the asking price?

Question 3 What nonquantitative factors might have an impact on the fairness of the asking price?