What’s Your Business Really Worth?

A recent article on Inc.com, “How to Find Out What Your Business Is Really Worth,” provides advice from a professional who has owned multiple businesses to small business owners, who might be wondering how much their businesses are worth. He discusses his own experiences as a business owner and wondering what his business was worth; essentially, he was guessing at what his business was worth, only to realize that he was way off.

Some Tips if You’re Thinking About Selling a Small Business

The first step you have to take is getting your financial house in order and getting a business valuation, and this post outlines some of the documents that you’ll need to prepare for a valuation of your company.

Strive to Be Unique and Improve Your Business’s Value

There was an interesting article in the Fort Worth Business Press today called “Strive to be unique; it’s where the real value is.” The article discusses business owners who, after having a business valuation performed, want to know how to increase the value of their business. The predictable answer is to work toward increasing bottom-line profits, but there’s another, more effective way of improving your business’s worth: Differentiate yourself.

Financial Advisors Urging Business Owners to Know the Value of Their Businesses

Because of the economic downturn, many business owners are reluctant to think about the value of their businesses. Fearful that their businesses have lost value, it’s the last thing they want to hear about. An article in Financial Advisor suggests that many business advisors are urging their clients who own businesses to have their businesses valued in order to gauge their business health and for planning purposes, including adjusting estate and succession plans.

Small Business Owners and Planning for Retirement

In today’s New York Times online blog, You’re the Boss, there is a thought-provoking post “Are You Sure You Don’t Want to Retire?” that discusses the plight of older small business owners who are being forced to consider whether or not retirement will be in their future. The author, Barbara Taylor, discusses a recent Gallup poll that reports that 47% of small-business owners may never retire.

Present Value LLC is a worldwide international appraisal and advisory company that provides a range of professional services such as Certified Machinery and Equipment Appraisals, Inventory Appraisals, Asset Verification Services, Business Valuations, and Real Estate Appraisals. Contact us today!

By: Present Value

The author likens getting ready to sell a business to selling a home. You need to make sure that everything is in order and looks as presentable as possible. And, she recommends working with trusted professionals who understand all the ins and outs of selling businesses.

The article recommends that the first step you have to take is getting your financial house in order and getting a business valuation, and it outlines some of the documents that you’ll need to prepare for a valuation of your company.

• Tax returns from the past five years
• Internal financial statements from the past five years
• Year-to-date financial information
• Year-to-date financial information for the year-ago period
• Minutes of board meetings and annual meetings (if a corporation)

The article also suggests that when preparing for a business valuation most businesses will need to adjust financial statements to better reflect actual earning power and perform an analysis of risk.

But that’s just the first step, and there’s still a lot more to be done, the article cautions, including disclosing any other details that may be relevant to a potential buyer.

Present Value LLC is a nationwide appraisal and advisory company that provides a range of professional services such as Certified Machinery and Equipment Appraisals, Inventory Appraisals, Asset Verification Services, Business Valuations, and Real Estate Appraisals. Contact us today!

By: Present Value

Small Business Owners Find it Difficult to Sell

Small Business Owners and Planning for Retirement

Financial Advisors Urging Business Owners to Know the Value of Their Businesses

The number of businesses being sold has decreased in the last two years, according to the article. One expert argues that one of the problems is that business owners’ asking prices are too high because they believe their businesses are worth what they were three years ago.

One owner cited in the article opted to liquidate his assets rather than wait for the market to improve or for another recession. As a result, he will only earn approximately a third of what he was asking.

Make sure you know what your business is worth.

Present Value LLC is a nationwide appraisal and advisory company that provides a range of professional services such as Certified Machinery and Equipment Appraisals, Inventory Appraisals, Asset Verification Services, Business Valuations, and Real Estate Appraisals. Contact us today!

By: Present Value

Additional Reading:

Liquidation 101

Small Business Owners and Planning for Retirement

Financial Advisors Urging Business Owners to Know the Value of Their Businesses

Business owners have different reactions when they find out that their businesses are worth less than they once were. Some decide to delay selling their business, and others use it as an opportunity to make necessary changes. One business owner who was interviewed said that he was glad to know the value of his business because it enabled him to determine steps he needed to take to improve the business and prepare to potentially sell it within 10 years.

According to experts, some businesses are worth 30% less than a few years ago, and they argue that understanding the value of a business can help owners determine whether or not they should sell their business or bequeath it to the next generation. On a positive note, a lower valuation can benefit owners in terms of taxes right now. The article highlights the fact that if owners are planning to pass on the business to their children, now might be the time to do it, since estate taxes are “expected to rise next year and new restrictions on use of trusts could also be coming soon.”

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Additional Reading:

How Does the Economy Affect Business Value?

Strive to Be Unique and Improve Your Business’s Value

Partnership Dissolution

A recent Time Magazine article reported that many small and community banks are now seeing more demand for loans, which is a positive sign for the economy. According to the article, economists have expressed concern that despite the 3.2% first quarter economic activity growth, there was a lack of business lending activity. Business lending demonstrates business growth, they argue. Businesses in growth mode need financing to purchase equipment and hire staff, and without that there can’t be sustained economic recovery.

As we have discussed in previous posts, banks are lending money, but they are being more cautious about their investments. This means they are conducting more careful due diligence, which includes their own certified equipment appraisals and business valuations to ensure that they will recoup their losses should a loan default. Having a defensible, impartial appraisal in hand can help increase the chances of getting much-needed money for a small business.

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Additional Reading

5 Cs of Lending (How Appraisal Fits in Even Though It Doesn’t Start with C)

Got a Startup? Get a Business Valuation

Present Value: More than an Appraisal Firm

Some of the important takeaways from the article are:

• Keep an open dialogue with those who will be affected by the plan, such as family members and business partners.
• This is a process that lasts as long as the life of a company and it needs to be continuously refined and updated.
• Find people you trust to work with you on planning, including estate planners, attorneys, accountants, insurance providers, and of course business appraisers.

It’s something to think about because no business owner wants their hard work, blood, sweat, and tears to be all for naught. You can take steps now to ensure the future of your company.

By: Present Value

Other posts you might find interesting:

“Five Myths of Business Valuations”

“Adjusting Your Exit Plan”

“Succession Plans”

“Business Valuations and Estate Planning”

We’ve written multiple posts on why it’s important for a business owner to know the value of his or her business. It’s equally important for a potential buyer to understand the value of a business that he or she is considering for purchase and to know what he or she is getting in the deal.

Of course there are many things to take into account when contemplating buying a business, such as your own strengths and weaknesses, your understanding of business fundamentals, and your understanding of the potential market in which the business operates. Obtaining a professional business valuation can help you better understand the ins and outs of a particular business, like a business’s cash flow, the value of its assets and/or equipment, how the company acquires customers, and the market in which it operates.

If you’re thinking about buying an established business, get an appraisal. You need to know what you’re getting into.

By: Present Value

For a startup company, a valuation can be used as a business performance indicator, reflecting the company’s direction. It can help business owners figure out what’s working and what’s not, and where resources should directed or re-directed. A valuation can also give a deeper, more complete understanding about the competitive forces and drivers in the business’s market.

For any company, a business valuation can provide a snapshot of the business within the context of the market and industry in which it operates, in addition to evaluating the health of the market itself. This can help business owners at any level determine if the initial opportunity is still present and/or whether or not an exit from the business and the market is warranted.

It may be a wise decision for startup business owners to incorporate business valuations on a somewhat regular basis to determine if the company is achieving its desired trajectory.

By: Present Value

The article highlights the fact that most business owners have no idea how much their businesses are worth. The writer points out that it is necessary for a business owner to know the value of his or her business in order to set realistic expectations for both the seller and potential buyers. Many sellers may be setting themselves up for disappointment if they don’t understand the potential market price of their business. And if an asking price is too high, it could jeopardize the attractiveness of a business to potential buyers.

Here are all the quick tips from the article for anyone who may be thinking about selling a business:

• Put yourself in the buyer’s shoes.
• Don’t go it alone. Assemble a team of professionals, most importantly an attorney and an accountant that you trust.
• Get a professional valuation of your business.
• Make sure your financial house is in order prior to sale.
• Familiarize yourself with the entire selling process, from start to finish.

If you are thinking about selling a business in the near future, contact Present Value LLC for all your appraisal and business valuation needs.

By: Present Value

A period of growth, for some companies, might require expansion financing to obtain capital to grow their business. Such financing could be used to support the business’s growth through endeavors such as hiring additional staff, purchasing equipment, acquiring real estate, or ramping up marketing efforts.

Businesses need to demonstrate the clear value of their growth in order to justify financing. While the sources of financing can vary greatly – from banks to friends and family members – for the most part, lenders will require detailed, complete business and operating plans. As we discussed in our last post, lenders are conducting more vigorous due diligence than in the past. So, in addition to the traditional business information, lenders are requiring third-party appraisals to provide greater protection for themselves and their investments.

An appraiser must be able to take into consideration all aspects of a business, including operating costs, assets, equipment, revenue, etc. in order to establish a complete picture of the value of a business. Business potential, economic growth, and market growth are other factors that need to be taken into account for this type of appraisal.

In addition to providing clarity to a potential lender, an appraisal can also help business owners make crucial decisions in a time of economic uncertainty.

By: Present Value