When valuing a business, there are three general approaches to determine value: the Asset Based Approach, the Market Approach, and the Income Approach. Within each of these approaches there are various Appraisal Methods used to determine value. The Asset Based Approach method adjusts assets from their reported book value to their in-place market value utilizing […]
The following are factors that can have a negative impact on the value of a business and some are issues that can rear their ugly head during the due diligence investigative period. Keep in mind that this list is a compilation of potential problem areas and do not apply to all types of businesses. […]
What does it mean when we say that we need to “Recast” your financial statements as one of the initial steps in preparing to sell your business? Financial statements and tax returns for most privately-held businesses are prepared for tax purposes, not for business sale purposes. The objective of business owners and their financial advisors […]
Since the biggest part of the purchase price of a profitable small business is goodwill, it is important for a buyer to have knowledge and understanding of just what goodwill is and why there is value in it. Much of the value of a business is not to be found in its hard assets such as […]
Takeaway: Identifying and articulating the goodwill in your business can have a significant impact on business value. According to a 2010 study by KPMG entitled, “Intangible Assets and Goodwill,” over 50% of the purchase price of a business is typically allocated to goodwill. Since the largest part of the purchase price of a profitable small business […]
Vacation – it’s often an elusive concept for the owners of small businesses. Even when owners do take time off, chances are they’re still checking in constantly, which has become increasingly easy to do in this age of the smartphone and ever-omnipresent Internet connectivity. The ironic thing is that this constant owner involvement can actually […]
The valuation of a restaurant is much like any other business valuation. But, there are certain factors unique to the restaurant industry. The universal drivers for many restaurants are pretty simple: quality, hospitality, consistency, value, cleanliness, and customer loyalty. You may have heard the saying that the three most important ingredients for a successful business […]
Takeaway: Internal and external factors are important considerations when selling a business. Here are issues you should think about when trying to time your exit. There are many factors that determine best timing for selling a small business — the financial condition of the company, valuation, growth cycle, profit history, and the current market. Usually […]
Circumstances that give a business an advantage over its competitors, strengthen its strategic position, or can be leveraged for future gain boosts business value. Why? Because it increases the probability of the continued future profitability of the business and decreases perceived risk by prospective buyers. As with all value drivers, it’s about risk. Lower risk […]
There is little doubt that valuing a business is often complex. In part, this complexity is due to the fact that business evaluation is subjective. The simple fact is that the value of a business is often left to the mercy of the person conducting the evaluation. Adding yet another level of complexity is the […]
“I have a medium sized company which I have owned for about 20 years. We specialize in the manufacture and distribution of chemical products and have built a good business. However, my children aren’t involved or interested in the business so I am considering selling it. The problem is that I have no idea how […]
Takeaway: Evaluate your company through the eyes of a buyer. Master these ten value drivers and sell at the higher range of the multiples normally associated with your industry. What Factors Drive Value in a Business? A valuation is not about determining what a company is worth in the current owner’s hands, it is about […]