There is the old anecdote about the immigrant who opened his own business in the United States. Like many small business owners, he had his own bookkeeping system. He kept his accounts payable in a cigar box on the left side of his cash register,...
1. Start with the business
- Value Drivers: Size, growth rate, management, niche, history
- Value Detractors: Customer concentration
Lack of agreements with employees, customers, suppliers
Poor exit possibilities
Potential technology changes
Product or service very price sensitive
2. Financial analysis: Market Value - comparables
Multiple of Earnings - based on rate...
“There are many reasons for valuing an entity, and those circumstances can lead to different outcomes…For instance, a business’s value for sale on a going-concern basis will differ from its value for liquidation purposes. It similarly makes a difference if the valuation is for an...
Many courts and the Internal Revenue Service have defined fair market value as: "The amount at which property would exchange between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having a reasonable knowledge of relevant...
Is there pricing elasticity?
What's the company's competitive advantage?
Status of employment agreements and non-competes?
Are there cost savings after purchase?
Are there significant capital expenditures pending?
Is there synergy with the seller?
Is it perceived the integration will go smoothly?
Are there substantial cross-selling possibilities?
Will the cultures blend?
The Financials: By...
What is the value of your business? There are many ways to approach that question -- based on complex formulas or just a good hard look at the balance sheet, but no answer based purely on numbers is going to be exactly right. Even factoring...
1. Build a solid management team. A business with sales of $5 million and up needs a full complement of officers and directors. Such a team might include: a COO, a CFO, a sales manager and, depending on the type business, an IT director. It is...
This question can only be answered by addressing other related questions, specifically: Who’s asking and for what purpose?
From the perspective of the owner, prospective buyers, the IRS, lenders and divorce & bankruptcy courts, the value of a business for purposes of a sale, estate planning,...
If you are considering entering the world of franchising, an important consideration is assessing the value of the business. All of the following factors either affect or help determine valuations of typical franchise operations:
1. Franchise Agreements:
Typically, franchise agreements can cover a period of twenty years;...