Present Value LLC » business worth

Small Business Owners Find it Difficult to Sell

admin — Wed, 27 Oct 2010 00:49:29 +0000

A recent article in the Wall Street Journal, “Businesses Put Up for Sale Smack into Harsh Reality,” demonstrates just how difficult the market is for small business owners who are looking to sell their businesses. The article hammers home the fact that the small business market is stagnating due to tight credit markets and the hesitancy of buyers and sellers who are unsure whether the markets will improve or decline.

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

Strive to Be Unique and Improve Your Business’s Value

admin — Thu, 05 Aug 2010 22:07:17 +0000

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.

If this is something you’re interested in pursuing, the article offers a few things to try. For example:

Offer superb customer service
Work on developing your research and development capabilities
Provide a reliable product
Build a lengthy and enviable customer list
Make sure that you have stellar people in key management positions

Other things that help your company stand out, but that you may not be able to control, include the ease with which other competitors can enter the market and whether your business is the only one of its type in your territory.

If you’d like to increase the value of your business, which is an especially good idea if selling the business is part of your plan, try implementing some of these techniques. Then test your success by contacting a reputable business appraisal firm and asking them to determine the value of your business.

By: Present Value

Additional reading:

Determining a Business’s Selling Price

Brand Strength Contributes to a Business’s Value

Five Myths of Business Valuations

admin — Wed, 10 Feb 2010 14:27:56 +0000

SCORE, an informational organization that caters to small businesses, has a great article on its website about the myths of business valuations. The myths it lists are:

Myth 1 – Valuing a private business should only be done when the business is ready to be sold or a lender requires a valuation as part of its due diligence process.

This isn’t true. Effective financial planning requires regular valuations. Especially if a change in ownership is expected. We’ve written about the different occasions, other than at the time of purchase or sale, when a valuation might be necessary here, here, and here.

Myth 2 – Businesses in my industry always sell for two times annual revenue (the revenue multiple). So why should I pay someone to value my business?

Often, the numbers you see when determining sale prices in your industry are median sale prices. Your business could have a value much different than the median sale price in your industry.

Myth 3 – A local competitor sold his business for three times revenue six months ago. My business is worth at least this much!

A lot can happen in six months. Economic conditions can shift quickly and you may be selling your business in a much different environment than your competitor did six months ago.

Myth 4 – How much a business is worth depends on what the valuation is used for.

A business’ worth is determined by its fair market value, which, if determined properly, should be the same no matter what the valuation is used for.

Myth 5 – Your business loses money, so it is not worth much.

Sometimes, it may just appear that your business is losing money. When you take a look at discretionary expenses, you will likely find quite a bit of cash generated by your business.

Don’t believe the myths. Get the facts about your business’ worth with a professional business valuation.

You can read the full article on the SCORE website here.

By: Present Value