Business valuation tips, updates and advice. Pick up a few suggestions on how to value a business. Feel free to browse the contents or share your thoughts by leaving a comment.
If you are looking to sell your small business or plan to buy one, the central question is what the business is worth on the market. Overprice your business, and you will see little buyer interest. If your asking price is too low, you risk leaving a lot of money on the table. Knowing the market… Continue Reading
Heating, ventilation and air conditioning as well as plumbing contractors make up a very large industry with over $121 billion in annual gross revenues. The industry is still highly fragmented with some 178,550 independent business competing across the US alone. The average business in this industry, classified under SIC 1711, is privately owned and small… Continue Reading
There are no better indicators of what a business is worth than its earning prospects and risk profile. Savvy investors analyze business opportunities by doing careful forecast of their income. But forecasts and money in the bank do differ in one key respect – there is a risk that the business may not live up… Continue Reading
Any business appraisal, whether prepared by you or someone else, depends on the assumptions made at the outset. Take a look at a well-prepared business appraisal report and you will see that, how the business value is measured as well as the circumstances of business appraisal, are clearly spelled out. In addition, assessment of business worth requires informed judgement… Continue Reading
If you own a coin laundry or plan to purchase a laundromat business, you are in good company: there are over 16,700 such businesses in the US alone. The annual revenues for the industry as a whole are just under $2.2B. Yet the average coin laundry is a typical small business: it employs 3 people… Continue Reading
When it comes to valuing a partner’s stake in the business, valuation of the business as a whole is the first step. The next big question is how to allocate this business value among the partners. You may think that that the total business enterprise value should be divided in proportion to the partners ownership… Continue Reading
The numbers of the baby boomers reaching retirement age keep growing. And there is one skilled services sector that is sure to flourish – home health care. Indeed, home health care services, classified under SIC code 8082, have been experiencing rapid growth recently. As a result, there are excellent opportunities for differentiation since a business… Continue Reading
We talked about the factors that create personal goodwill in small businesses and professional practices. The key takeaway is that personal goodwill is associated with the individual practitioner, not the business organization. In contrast, institutional business goodwill arises from the business or practice itself. This is the type of goodwill that you can transfer easily when the… Continue Reading
Business goodwill valuation comes up often in the context of valuing professional practices and consulting service businesses. The typical examples are medical, dental and other healthcare practices, CPA and law firms, engineering and architecture consulting businesses and other professional service companies. A key question you may need to address is how much of the practice… Continue Reading
Auto tire retail stores, classified under SIC code 5531 and NAICS 441320, represent around 19,000 establishments in the US alone. Over two thirds of these businesses are small, owner-run single store operations. Check these interesting facts: while the industry as a whole generates over $77bn in revenues, the average store makes around $1,500,000 in annual… Continue Reading
If you are looking to have a business appraised hiring an appraiser is one of the ways to do it. As with any professional engagement the question of costs comes up rather quickly. Not surprisingly, professionally prepared appraisals don’t come cheap; the average hourly rates these days are around $300. A well-done business appraisal takes… Continue Reading
If you are looking at valuing an owner-operator managed small business, then the Multiple of Discretionary Earnings business valuation method should be high on your list of priorities. One of the best examples of the so-called direct capitalization valuation methods, this method determines the value of a business as a multiple of its discretionary cash flow.… Continue Reading
If you ever tried raising debt capital from a bank, you know that lenders base their decisions on business cash flow. In other words, the key consideration is whether the business can repay the loan in full and on time. Lenders build in the risk into the debt service coverage ratio. This gives the bank… Continue Reading
If you own a car wash business or looking to buy one, here is a piece of good news: car washes are one of the most profitable sectors of the service industry with above average profits. These businesses are known to generate steady income due to the necessary and recurring nature of the service they… Continue Reading
Perhaps the greatest advantage of the renowned Discounted Cash Flow business valuation method is its flexibility. You can choose any stream of business income and discount it to determine the business value today. However, to get accurate business valuation results, you need to match your earnings and the discount rate carefully. Net cash flow and… Continue Reading