Posts Tagged ‘Business Valuation’
… And Then Get Back to Living
Few people want to think about their own mortality; we’d all rather assume that we have all the time in the world. But in reality, none of us knows what tomorrow will bring, which is why planning for what you leave behind when the inevitable happens is so important.
The Wall Street Journal’s blog today published an article about the difficulty caused when a business owner died suddenly without a succession plan in place. We’ve written about the importance of succession planning here, here, and here, but a real-life example like this helps underscore the idea.
The story, which you can read here, describes a financial advisor in his late 50s who was the sole owner and advisor in his company. When he died suddenly, his clients were left with no one to handle their accounts and ended up scrambling to find a new money manager. The irony here is that financial planners always stress to their clients the importance of succession planning, especially in sole proprietorships.
The article goes on to discuss another financial services firm with a middle-aged, sole owner that lost two huge clients who were concerned about what would happen to their accounts if their advisor died suddenly. This proves that succession planning is important for the health of a business even before the plan would be put into action by a death. Perhaps if that business owner had a plan in place, he could have reassured those clients and kept them on his roster.
If you’re putting a succession plan in place, remember that a thorough business valuation is an important first step.
By: Present Value
SBA Starts Waiting List for Small Businesses Seeking Loan Breaks
On Friday, the Small Business Administration announced that it had just about run out of money for the small business loan incentives – 7(a) and loan fee reductions – enacted last year by the economic stimulus package, and that a waiting list will be established for those small businesses seeking credit should more money become available.
These incentives were designed to reduce the fees on loans to small businesses and offer a 90% guarantee to banks that make SBA loans, making loans less expensive for borrowers and less risky for lenders. The normal guarantee for the average 7(a) loan is 75%.
The original $375 million in funding set aside last year for these two measures initially ran out in November, so the SBA set up a waiting list. In December, when another $125 million was put toward keeping the programs running through February 2010, there were more than 1,000 businesses on the waiting list.
The Senate voted to advance a $15 billion job-creation package Monday, but the funds for another extension of the SBA loan incentives were stripped from the package prior to the vote. So as of now, it remains to be seen if those businesses on the SBA waiting list will receive their loans.
These SBA loan breaks revived SBA lending, and enabled small businesses to get access to capital that they had previously been unable to get. Because of the breaks, 7(a) lending is up by 90% since the stimulus plan was enacted despite the fact that other loan activity has declined. Small business groups and many lenders believe these incentives are key to economic recovery and are urging Congress to appropriate the funds to keep the program alive.
Present Value LLC is a certified appraisal company and provider of business valuation services.
By: Present Value
Buying a Business? Make Sure to Do Your Homework
It may seem easier to purchase an established business than to start one from the ground up. While this may be true in some cases, there could be problems with an existing business that may not be clear upon first look. However, oftentimes purchasing a business can end up being just as costly and labor intensive as a startup. Sometimes there are inherent flaws in a business, which is why it is up for sale. As when starting a new business, you need to conduct the proper research and due diligence on any company that you may be thinking about purchasing, which includes getting an unbiased business appraisal of that company.
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
Got a Startup? Get a Business Valuation
Most people generally only think about having the value of their business appraised at the time of a potential sale or acquisition. As we have talked about in previous blogs, there are numerous situations in which a business owner must think about getting a business valuation, including when selling a business, for estate planning purposes, and when planning exit strategies. However, something that most people don’t realize is that startup businesses can benefit greatly from undergoing the process of a business valuation.
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
Professional Business Valuation and Selling Your Business
Last week, there was an interesting article, “How to Sell Your Business,” in The New York Times. As the title suggests, the article covers the numerous things a business owner needs to think about when considering selling his or her business. We will focus on one of the author’s tips, which we have discussed in previous blog posts (you can read them here): make sure you know what your business is worth.
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
New Year, New Planning
This year, 2009, has been a tumultuous one. While there is no way of knowing what the future will hold, you can plan for the future. Planning for the future of your business is always a sound move. You need to know the value of your assets and the value of your business.
Over the past year, we have covered a number of issues that can affect your business. Today, more than ever, it is important to know what it’s all worth. As a business owner, it is important to know the true market value of your machinery, equipment, and business, for things such as business planning, succession planning, business insurance, and business valuation.
In the new year, it makes good financial sense to obtain a credible certified equipment appraisal report that will hold up under scrutiny with financial institutions, government agencies, buyers, sellers, shareholders, or partners. Make sure you know what it’s all worth.
By: Present Value
Present Value: More than an Appraisal Firm
Following up on our press release that went out on Tuesday, December 8, 2009, we’d like to focus a little bit more on some of the characteristics that make Present Value a unique full-service appraisal firm.
While lenders and business owners have many choices when it comes to finding an appraisal company, at Present Value, we pride ourselves on being more than just a company that provides appraisals: we act as a trusted resource for lenders and business owners. We can act as consultants to help guide our clients as they make crucial business decisions, whether it be a lender, looking to conduct pre-loan due diligence or auction assets from a loan default, or a business owner, looking to obtain financing or make an acquisition.
In addition to providing appraisal services, Present Value has the expertise and experience to orchestrate other aspects of these deals. The strength of our services comes from the partnerships that we have developed all across the country. We have the capabilities to bring the right people to the table for whatever our clients’ needs may be, such as auctioneer services or brokerage services. We aim to be problem-solvers for each and every one of our clients, helping them make well-informed business decisions.
Present Value prides itself on its turnkey service offerings, and Present Value is happy to act as a resource for its clients as they cope with past mistakes and look toward improving their processes. Our network of professionals will always deliver the highest quality products, backed by a team of experts in their individual market segments.
By: Present Value
Expansion Financing in a Down Economy
While the economy is showing signs of improvement, many small businesses are still finding it difficult to stay afloat. However, there are a number of businesses that have been able to not only survive, but succeed despite this economy. For companies like this, a down economy can be seen as a time for growth.
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
Loan Refinancing
There’s one thing that most of us have in common these days – families and businesses alike are all struggling to reduce expenses as the country weathers this economic storm. Businesses are re-negotiating with vendors and stripping down to basic operations in order to survive. But another viable money-saving solution for businesses to consider is loan refinancing, even if they’re not necessarily struggling to make their monthly loan payments.
A business owner needs to be aware of the environment in which his/her company is operating in order to protect its financial health. And one characteristic of the current environment is extremely low interest rates, which makes it a perfect time to refinance loans. When most people think of loan refinancing, they don’t think past their commercial mortgage loan. But it may be a good idea to refinance equipment loans as well. By refinancing an existing equipment loan, a business owner can lower his/her interest rate and as a result, reduce his/her monthly payment and free up cash that can go toward growing the business or taking care of emergency expenses he/she may be facing.
If you decide that refinancing is right for you and begin talking to a lender, the first thing a lending company will require is an appraisal of your assets so that it can understand the value of your business or equipment.
Refinancing alone may not protect your business, but combining this method with other means of cost reduction should help you survive the current economic climate and emerge healthy and ready to grow.
By: Present Value
Business Valuations and Estate Planning
Estate planning is possibly the most neglected, but arguably the most important aspect of family-owned businesses.
Estate planning sets up the transfer of an individual’s property to designated beneficiaries to minimize or possibly eliminate the taxes levied by the U.S. Unified Gift and Estate Tax Program. Without estate planning, the tax liability of the business can be so oppressive that the only choice the inheritor has is to sell off all of the company’s assets and either soldier on without them, or shutter the business and walk away.
A periodic valuation of the business can help the owner and family members better understand the nature of the estate tax concerns. The valuation can also provide a guide the business owner can use to set up ownership transfers, and can provide a basis for the valuation of gifts. More importantly, it can guard against future conflicts with the IRS.
Business succession planning is just as important as estate planning to the future of a business. Making business succession plans (determining which family member or combination of family members will carry on the business) requires careful thought that will often cause the business owner to reconsider his original position on who will carry on the operations once he is gone or no longer able to maintain the leadership role.
By: Present Value
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