Establishing the Value of Your Business

Some owners have a figure in mind of what their business is worth; often it’s inflated because of their emotional attachment. On the other hand, many owners undervalue their business because they do not understand the technicalities of the various valuation methodologies and which of these is most appropriate for their specific business type.

Experience has shown that there is also a large percentage of business owners who do not know what their business is worth, nor how to go about establishing its true market value. Link uses many of the established valuation methodologies, often using a range of different options in combination to establish the most accurate figure. This figure is then further scrutinised by comparing the theoretical value with current and historical sales information from the Link database. This ensures that the valuation appraisal accurately represents what a purchaser will pay in the current market.

Profitability and Risk

Most businesses are valued based on a combination of assets and the cash surpluses generated. The risk factor of the specific business is also taken into account. This is the degree of threat from existing or potential competitors, changes in technology or consumer trends and many other factors that may affect earnings or costs.

“Barriers to Entry” is another issue that is taken into account and involves evaluating the degree of difficulty or barriers a competitor may face should they decide to establish a similar business. For example, businesses which require minimal capital investment or technical knowledge are said to have a very low barrier to entry and consequently, may have a lower value.

Most businesses are valued on a “going concern basis” rather than the value of company shares. Purchasers are reluctant to buy company shares for a variety of reasons including the unknown possible future tax, credit or legal liabilities, or the danger of inheriting contingent liabilities based on historical trading. The price of the business is usually made up of three components:

1. Intangible assets.

The future earning potential of the business reflective of historical earnings potentially including intellectual property (IP), right to products or services, benefits of a lease, contracts, techniques and procedures as well as goodwill.

2. Tangible assets.

The fixtures, fittings, plant and equipment used by the business to generate its income. This component is normally calculated according to its depreciated book value.

3. Stock.

Stock purchased by the business for resale or manufacturing purposes. It is valued at the historical cost price. An allowance may be made for old or obsolete stock.

Valuation Methodologies

Generally, two or more of the following methods are used to appraise the value of a business:

1) Industry Ratios

2) Asset Based

3) Earnings Based

4) Market Based

The appraised value is then subjected to the “sanity test”. Some businesses are in a growth industry where their track record is well established and their projections solid. Other businesses may be in what is known as a sunset industry where projections are less optimistic. Many factors affect the true market value of a business, including business sector, economic conditions, business cycles, interest rates, labour availability and a whole host of other influences. Similarly, the value of trademarks, brands, intellectual property and goodwill is not always easy to quantify. Balancing all these factors with the book valuation of businesses establishes the true market value.

1. Industry Ratios

The value of the business is based on its sales record compared with industry averages. This method is often used for small businesses and franchises where there is an established track record within a specific industry. It may also use a formula of multiples of weekly sales or an average derived from sales of similar businesses.

2. Asset Based

In businesses where there is history of low earnings or perhaps even losses, the Asset Based approach is generally used. Using this method, the value of the collective assets (both tangible and intangible) will determine the value of the business. In many cases there will be an element of goodwill payable, even where a business is not trading profitably. Although the assets alone may be purchased on the open market, there is often value in purchasing assets as a going concern, which may include customer lists, relationships with suppliers, an assembled workforce, brand awareness and reputation, among others. Calculating intangible assets, including goodwill requires some subjective judgement coupled with experience and the use of market comparisons.

3. Earnings Based

Generally the earnings based approach is used for larger businesses and places emphasis on earnings rather than assets. There are various methods used when employing the Earnings Based approach to appraisals. Return on Investment (ROI) or capitalisation of earnings is common, as is the application of earnings multiples.

Earnings Based value is determined by considering:

A. The level of return that could be expected by investing in the business in question, taking particular account of the perceived level of risk and realistic costs of management.

B. The “industry average” multiplier on true earnings. This multiplier is market driven and varies according to perceived industry risk factors, perceived earnings sustainability and historical comparisons. The multiplier used most often in this approach is EBIT (Earnings before interest and tax) but others are frequently used and it is critical that you are comparing “apples with apples” when discussing multipliers.

C. The fair market value of the unencumbered tangible assets of the business e.g. plant, fixtures, fittings, equipment, stock and the tangible and intangible assets which may include intellectual property.

EXAMPLE OF ASSETS BASED METHOD

A dry-cleaning business has been breaking even and the owners would like to sell and move on. The business has tangible assets with a total book value of $135,000, $5,000 of stock (all saleable), no bad debts and will pay all creditors. The fair market value of the tangible assets has been assessed as $110,000 and intangible assets and goodwill at $15,000. Therefore the fair market value of this business is calculated as follows: $110,000 (tangible assets) %2B $15,000 (intangible assets and goodwill) %2B $5,000 (stock) = $130,000.

EXAMPLE OF ROI

Tom’s manufacturing company produced an adjusted net profit of $160,000 (EBPITD). The net assets (Valuation of plant and stock) for the business were $240,000 and a fair salary for Tom (owner) is $70,000. If someone was looking to invest in this business they could expect a 25% ROI, as this business offers a low to medium-risk investment opportunity.

To calculate the ROI value for Tom’s business:

Business profits (EBPITD) ………………………$160,000

Minus owner’s salary ………………………………$70,000

Profit ……………………………………………………$90,000

Return on Investment

Profit of …………………………………………………$90,000

Divided by desired return ………………………………..25%

Valuation appraisal ……………………………….. $360,000

4. Market Based

There will be certain instances where no amount of sound theory or application of complicated methodologies alone will suffice. It is not uncommon that a willing buyer and a willing seller will agree on a value that defies all traditional appraisal methodologies. In other cases the use of traditional appraisal approaches produce unrealistic values that have no bearing on market realities. It is important in any appraisal to overlay relevant market data and multiples achieved in similar businesses “in the real world”. Unfortunately the level of information available in Australasia is not as sophisticated as that available in other parts of the world.

How will taxes affect your pay out?

There are tax issues you may need to consider when selling your business. For instance, if you sell the plant and equipment (or company car) for more than the depreciated book value, you may have to pay back some of the tax you claimed when the items were depreciated (depreciation claw-back). Other tax liabilities may be incurred on the profit of land and buildings if they are included in the sale. It is vital that you fully understand your tax position when selling your business, and professional advice should be sought.

“Any desktop valuation involves a substantial amount of subjective judgment. The real test of the value of a business enterprise, like any asset, is what a buyer is prepared to pay.”

5 Takeaways That I Learned About Tips

Beard Grooming and Care Tips: How to Make Your Beard Thicker

A beard is often associated with masculinity, leadership, wisdom and power, and the thicker the beard is the more it commands respect. However, the challenge of growing a thicker beard is never easy, because once it reaches a certain point, it results to itchiness, resulting to shaving or trimming the beard early. Most often than not, the beard may look weak and thin brought about by a combination of improper skin care techniques and poor diet. The online world has a lot of information stored for you, so you can increase your knowledge and understanding on the best tips for having a thicker and faster growing beard, and beard grooming care you can do to achieve it.

Growing a thicker beard should surpass the stubble phase, and it requires your commitment, for your beard to grow and take shape rapidly, because if you start shaping and trimming too early, you may stop the growth process and never attain the thick beard you really dreamed of. For a growing a thicker beard faster, you must start exercising, reduce stress, have a good sleep and rest, improve your diet and take supplements.

Regular exercise helps in increasing your testosterone levels, thus promoting healthy hair follicles and hair growth, and it also improves and increase blood flow, providing the nutrients and the oxygen needed to grow your beard stronger and thicker. Stress increases the amount of cortisol in the body having a negative impact in the production of testosterone, constricting the blood vessels and thus it makes more challenging for the oxygen and nutrients to get into your hair follicles. A good sleep and rest play a very important role in preventing patchy areas when you grow your beard, because it increase your body’s testosterone levels and helps promote healthier testosterone regeneration.

It has been known and proven that food supplements can stimulate the growth of facial hair in addition to a balanced diet. Supplements are being widely sold in the market today, and these supplements contain magnesium, zinc, copper, vitamin B, vitamin D, Vitamin E and iron for a healthier growing beard.

For grooming tips you can follow these things: knowing how and when to trim, matching your beard to the face of your shape, washing it regularly, putting beard oil, learning how to train your beard, not forgetting the mustache and fueling up. It is essential to prune your beard for it to be well-groomed, and thus investing in a quality trimmer and finding the right trimming technique are very important. Condition your beard using beard oil that comes in various scents, making it shinier and softer.

Cited reference: useful link

Monumental Life Launches New Online Store

FOR IMMEDIATE RELEASE

(Indianapolis, IN)— Monumental Life recently announced the launch of their brand new online store. The company’s website currently offers a selection of health and beauty products, grocery items, sports nutrition products, and health care products for consumers looking for effective products for every area of their lives. With the launch of the Monumental Life store, the brand’s owners have committed themselves to making these products easily accessible to all who need them.

“We are beyond excited to have finally launched the Monumental Life online store. There are so many web stores out there that simply carry popular brands and products without ever knowing whether or not they will work for their customers. However, our team has set out to create a different experience. Rather than simply making an attempt to have the largest selection available, we’ve made a commitment to carrying only those products that we know are effective. This creates a better shopping experience for customers and allows us to be a trusted source when it comes to their health and wellness,” said Monette Wagner of Monumental Life.

The Monumental Life online store is stocked with affordable health and beauty products that the owners have found to be effective during everyday use. The site is organized with carefully-curated collections that encompass Beauty and Personal Care, Grocery, Health Care, Sports Nutrition, and Dietary Items. The store accepts all major forms of payment, and new items are added regularly as the Monumental Life team continues to discover products they believe will be of maximum benefit to those who shop their store.

As Wagner continued, “From moisturizing shampoo to high-protein pancake mix, we’ve got our customers covered. Our store makes the best products on the market available and accessible to a wide audience, putting everything they need to promote health and wellness right at their fingertips. We are incredibly proud of the work we’ve done and look forward to building a go-to resource for those who want to live their best lives.”

Those who would like to get a glimpse of the new Monumental Life website or shop their selection of personal care, nutrition, and grocery products can log on to monumental-life.com.

About Monumental Life:

Monumental Life is an online store offering health and beauty products, grocery items, sports nutrition products, health care products, and dietary items. The brand is committed to making the best products easily accessible to all.

Source: http://markets.financialcontent.com/mng-elpaso.lcsunnews/news/read/33432371/Monumental_Life_Launches_New_Online_Store