Present Value LLC » Business Valuation

The Importance of Business Valuations During an Acquisition

admin — Thu, 08 Dec 2011 15:47:49 +0000

Overpaying for a company in an acquisition is the “No. 1 Reason Acquisitions Fail,” according to a recent article in Inc. The article argues that the more you overpay for a company, the longer it takes to realize the economic benefits and cause a number of other problems over time, including potentially destroying shareholder value.

To avoid the pitfalls of overpaying, the article suggests that you develop a thorough understanding of the true worth of the business you’re targeting.

The article proposes that price decisions should be met with questions like:

How will we achieve a reasonable payback on the acquisition price?
What is the most we are willing to pay before we walk away?
What investments will we need to make beyond pure purchase price?
How dependent are we on “synergies” to make the acquisition work?
Can we structure the deal more creatively to reduce our risk of overpaying?

You can read the full article here. If you’re thinking about buying a business, make sure you know what it’s really worth by getting a professional business appraisal to avoid overpaying.

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

Additional Reading

Top 5 Business Valuation Posts from Present Value in 2010

Professional Business Valuation and Selling Your Business

Present Value LLC Helps Clients Navigate Crucial Business Decisions in a Down Economy

Five Great Blog Posts on the Importance of Knowing the Value of Your Business

admin — Wed, 09 Nov 2011 01:08:05 +0000

Whether you’re looking to get funding for your business, sell a business, merge with another business, be acquired, or grow your business, knowing the value of your business is now more important than ever. So we scoured Present Value’s recent archives to find some of our best posts on business valuations. In the following posts, you’ll find some great tips on ways to increase the value of your business and when you should consider getting a professional business appraisal.

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

Exiting Your Business? Get an Appraisal

admin — Thu, 06 Oct 2011 12:44:52 +0000

Deciding the best way to exit your business is a big decision and can be overwhelming when you don’t understand your options. When thinking about exit planning, you need to figure out what you want and what will be best for the business. There are only a few options for exiting a business. By understanding these options, you can better decide which one is best for you. Business owners can exit their businesses by:

Transferring ownership of your business to your children or other family
Selling your business to all of your employees, to the management team, or your co-owner(s)
Selling your business to an outside third party
Selling a portion of your business to an outside investor
Conducting an orderly liquidation, during which the assets of your business are sold or auctioned off

Exit planning should be done as early on in the business as possible. Don’t wait until it’s too late. Getting trusted professional advice from a certified appraiser on the value of your assets and/or a business valuation can help to ensure that you make the right decisions for you and your business.

By: Present Value

Small Business Owners and Planning for Retirement

Thinking About Exit Strategies: Do You Know What Your Business is Worth?

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

Finding a Local Bank for Your Business Loan

admin — Tue, 27 Sep 2011 02:48:53 +0000

A recent article on Entrepreneur.com, “How to Find the Best Local Lender for Your Business,” provides tips for business owners who may be looking to get a loan from their local community bank.

Look for SBA-backed banks.
Check the Federal Deposit Insurance Corporation (FDIC) troubled-bank watch list.
Make sure the management team is stable.
Seek out a bank that may have a niche in your business area.

The article also reminds business owners that it’s extremely important to present well when approaching any bank for a loan to improve your ability to negotiate. It recommends taking the time prepare your loan package and financial statements. This can include having a business valuation in hand and/or an appraisal of your assets for collateral.

By: Present Value

Additional Reading:

Business Loan in Default? Your Best Bet May Be an SBA Loan Workout

Lenders Turn to Present Value LLC for Pre-Loan Due Diligence

Looking for Funding for Your Startup? Know the Value of Your Business

How Saleable is Your Business?

admin — Thu, 25 Aug 2011 14:17:47 +0000

In our blog posts, we frequently discuss the importance of business valuations for businesses at various stages of their lifecycles. Of course, one of the most important times to have business valuation conducted is if you are looking to sell a business. A recent blog post from The Portfolio Partnership “Building Businesses Buyers Love – The Saleability Test,” provides a useful Saleability Test check list for businesses to determine if they are highly saleable.

Saleability Test (15 Big Factors Driving Value)

Has a compelling story and clear customer results
Peers see it as top five in the industry
Sales and profits are growing at 25%
Three-year horizon shows strong and high-growth market
Current year trading and full year forecast is greater than previous years
Legacy products don’t dominate sales and profits
Significant annual profits, EBITA $10 million scores of 5
No one customer accounts for more than 5% of sales
Top 10 managers are regarded as world class
Business is not dependent on owner
Highest margins in the industry
Business model produces a sustainable annuity stream of income
Accounts are audited annually by recognized accounting firm
Staff morale and engagement are high
Legal contracts and filings are in good order

Click here to read the full post.

Additional Reading:

Is it a Good Time to Sell a Business?

Looking for Funding for Your Startup? Know the Value of Your Business

When Is a Good Time to Get a Business Valuation?

Alternatives for Small Businesses Seeking Funding in a Tight Credit Market

admin — Fri, 15 Jul 2011 18:32:10 +0000

As any small business owner knows, access to credit is still tight; however, there is capital available if you know how to go about seeking it out and take appropriate steps. A recent article in Inc., “New Rules of Getting a Small Business Loan,” provides some alternative ideas for businesses that still are having difficulty getting loans in the current economic environment. The article also provides a light of hope for many small businesses: “In Capital One Bank’s 2011 survey, 85% of U.S. small business owners said they were able to get the financing they needed.” The “new rules” put forth by article, include:

Factoring – In this scenario, you sell your invoices at a discounted rate to a third party or factor. “The business gets immediate cash flow and the factor assumes all liability of the debtor.”
Private Lenders – Think about going through a private moneylender.
Small Business Administration (SBA) – Look into the 7(a) loan program. “The Small Business Jobs Act upped the guaranty against default to 90% and also raised the maximum loan amount to $5 million.”
Small Banks – Check out small, local banks. They are often “entrepreneur friendly.”

Lastly, the article recommends asking yourself: Do you really need a loan? One expert cited in the article argues that looking for loans too early is a mistake that small business owners often make. They recommend figuring if you can you bootstrap or cut corners for a little while to make ends meet.

The article discusses some of the pros and cons of each of these potential alternative funding ideas, which you can read more about here.

No matter which avenue you choose to take when seeking credit, having a defensible, impartial asset appraisal in hand – prior to seeking a loan – can help increase the chances of being approved. Understanding what lenders are looking for and how a certified appraisal fits into lending criteria can help business owners find the funds they need to grow.

By: Present Value

Additional Reading

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

Case Study: Pre-Loan Asset Verification

The Importance of Inventory Appraisals and Asset Verification Services for Businesses and Lenders

Looking for Funding for Your Startup? Know the Value of Your Business

admin — Tue, 05 Jul 2011 13:36:29 +0000

An article from Mashable.com provides some tips for startup businesses that are starting the fundraising process in “9 Steps to Consider When Valuing Your Startup.” While the best way to really determine the value of your startup is to work with an experienced, certified, third-party business valuation expert, these tips can be helpful as you begin the fundraising process. Here are the highlights:

1. How much do you need?

2. How much equity are you willing to give up?

3. What’s the value of your intellectual property?

4. What’s the value of your other assets?

5. What are the barriers to entry in your market?

6. What’s the potential future value of your company?

7. How much traction have you gained in terms of customers?

8. Have you gained notable recognition in the market?

9. What’s your position in your marketplace?

For a startup company, a business valuation can also 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.

By: Present Value

Additional Reading

Got a Startup? Get a Business Valuation

Top 5 Business Valuation Posts from Present Value in 2010

Owning a Business and Getting Divorced

admin — Fri, 24 Jun 2011 01:35:59 +0000

An article in the Wall Street Journal Magazine, “How to Divorce a Business Partner,” discusses the numerous issues that can arise when a married couple who own and run a business together decide to divorce. The article cites the National Federation of Independent Business statistic that “more than one million husband-and-wife teams run businesses together,” and the divorce rate in the U.S. still hovers around 50% – you can do the math.

The article suggests that there are a number of ways that such a marriage and business separation can be handled:

Letting one partner buy out the other, either all at once or over time, as a 50/50 split or in some other proportion
Dividing the business in two
Continuing to run the business together even after the marriage ends, which the cited experts call the riskiest approach
Selling the business and splitting the assets

However the division of the business or assets is dealt with, one of the most important things to do first is get a business valuation and appraisals of all of the assets, including any machinery and equipment, that are jointly owned. You want to make sure that both parties get their fair shares.

By: Present Value

Additional Reading

Divorcing a Business

When Is a Good Time to Get a Business Valuation?

Preparing for Asset Liquidation

Cover Your Assets: Divorce Appraisals

When Is a Good Time to Get a Business Valuation?

admin — Tue, 05 Apr 2011 23:22:49 +0000

A recent article in Smart Business highlights the multiple uses of business valuations. It covers some of the questions that many business owners may have about business valuations. According to the article, some economists are predicting that there will be in an increase in mergers and acquisitions this year, so it might be a good time for business owners to think about whether they should get business valuations. Additionally, the article talks about some of the reasons you might want to consider a business valuation even if you’re not currently thinking about buying or selling a business.

“Even if none of these trigger events are happening now, it still can be beneficial to have a valuation. A business valuation can impart insights into a company’s strengths and weaknesses, as well as provide a road map for increasing its value. Understanding what adds value to your company can help you in future business decisions, such as timing the sale of your business for the maximum selling price.”

Here are some additional scenarios in which a business valuation can be helpful:

Divorce
Using gifts as a tax strategy in your estate plan
Liquidating a business
Acting as the executor of an estate
Seeking business financing
Strategic planning
Compliance with certain FASB standards
Converting a C corporation to an S corporation

To read the entire article, please visit Smart Business.

By: Present Value

Thinking About Exit Strategies: Do You Know What Your Business is Worth?
Collateral Proves Valuable for Businesses Seeking Loans
What’s Your Business Really Worth?

Thinking About Exit Strategies: Do You Know What Your Business is Worth?

admin — Thu, 24 Feb 2011 13:24:26 +0000

If you’re thinking about selling your business, you need to know the strategic value of your company to potential buyers. Do you know what your tangible and intangible assets are worth? And if you do, how can you increase the strategic value of your business?

An article on SmartCompany.com, Exit Strategies: Identifying Strategic Value, provides some tips to help business owners who are thinking about exiting their business. The article defines strategic assets as “those things which a business has which can eliminate threats or provide opportunities for the buyer,” such as:

Intellectual property (patents, trademarks, brands)
Customer base
Distribution channel
Technology or a technical process
Documented or codified knowledge
Agreements or contracts
Physical property, equipment, and inventory
Locations
Advisors, directors, managers, and employees
Access to specific institutions and organizations
Licenses, membership status, and authorizations
Social, government, or business networks

Understanding the value such tangible assets have can help you better understand how to value your business overall. It can help you to think more strategically about your exit. Do you want to sell your tangible assets separately? Or, should they be sold as part of the business? Getting trusted professional advice on the value of your assets and/or a business valuation can help to ensure that you make the right decisions for you and your business.

By: Present Value

Additional Reading

Small Business Owners and Planning for Retirement

Five Primary Exit Strategies

… And Then Get Back to Living