Profitability can help support the enterprise analysis, but it does not resolve treaty nationality, control, substantiality or the investor’s at-risk commitment. The proposed transaction and the buyer’s role still need review.
Assess the buyer as well as the business
Compare reliable operating results with the seller’s claims and the proposed purchase terms. A business that supported its former owner may face different costs, debt service or staffing after acquisition. Explain those changes in the projections.
Confirm that the purchaser will actually develop and direct the enterprise and that qualifying invested capital is documented rather than inferred from the purchase price. Profitability tells you about the business's past under a different owner; it does not establish that the buyer meets the requirements or that the enterprise will continue to perform. Look for what the results depended on.
Where revenue came from the departing owner's personal relationships, a single major customer, or a contract that is expiring or non-transferable, the historical figures may overstate what a new owner acquires. Ask what proportion of the customer base has been with the business under three years, and what the seller intends to do afterwards. Alongside that commercial assessment, the investor's own position still requires establishing: treaty nationality, capital irrevocably committed and at risk, an enterprise that is more than marginal, and the ability to develop and direct it.
A strong trading record does not supply any of those.