Making Your Business Saleable


Even if you are not the sort of person to build a business to take it public or sell it to a strategic buyer,it makes sense to build a business you can sell. After all there might be a day when you can no longer work and your business might be one of your major assets;An asset you can no longer manage or your children might not take to business or perhaps a particular business despite all your efforts to groom them etc.So who knows when you might find yourself  using BizBuySell or something else along the lines?

With the day-to-day demands of running  businesses, most owners put off getting a valuation until a sale is imminent. But its a good idea to start treating the valuation of businesses as an integral part of running them. If you like to think you’re building something that you can sell someday and don’t  focus on valuations, you don’t know if you really are. BizEquity and uValue, an iPhone app developed by Aswath Damodaran, a valuations expert at the Stern School of Business at New York University, might be places to begin. Read more of this post

How Much To Pay For A Business ?

When a seller quotes a price for his business it is known as “Ask price”. In response a buyer offers his price; this is known as “Bid Price”. After negotiation both parties agree at a price to close the deal. In order to make a bid price a buyer must do a valuation of the business he is interested in. There are five methods of valuing a business before buying it:

1. Asset Value: This is the easiest method in valuing a business. Underlying assumption in this method is that the business is a going concern. You tally all assets tangible and intangibles, fixed and current to get the total value. In the case of fixed assets either you can take the value net of associated depreciation or on replacement value basis. Current assets are appraised generally on realizable amount basis. Intangibles such as goodwill can be re-estimated. From the total assets value you must deduct outside liabilities to arrive at net value of assets in a business. Although the method is a popular one, it lacks credence as it does not take the capacity of the assets to generate income in the future, which is more meaningful to the buyer than just jotting up assets. Moreover, small businesses as well as service providers are very lean on assets but fat on earnings. Hence, asset value may not be representative for these businesses. On the other side of the coin, large scale industry is asset rich but whether they generate adequate returns on assets employed is a moot point. Read more of this post

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