How Experts Determine Business Value

For many entrepreneurs, the world of business value is shrouded in mystery. Like the reclusive chocolatier Willy Wonka, professional appraisers might as well be living behind walled fortresses and conducting their valuations in complete secrecy. And yet these business valuations are produced day after day. How do they do it? How exactly is the value of a company determined? If you’ve ever wished you knew the answers to tease questions, consider this article your golden ticket, your pass to pull back the curtain and see just how we do what we do. [...]

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Recent M&A Activity Indicates a Healthy Business Marketplace

Based on the following Thomson Reuters report about the recent global M&A activity, business owners can look forward to a robust business-for-sale marketplace in the coming months until next year: “Global M&A for Q2 2011 came in at $710 billion for 9,664 deals, compared to $786 billion (10,410 deals) in Q1 and $553 billion (10,407 deals) in Q2 2010. The driving sector was “high-tech” with a 16.1% market share of dollars, followed by financials (12.7%) and media/entertainment (12.3%). Private equity deal activity came in at $70.53 billion for 961 deals, compared to $53 billion for 983 deals the prior quarter. Q2 2010 had been $51 billion for 880 deals. High-tech also was the leading sector here (13.5% market share), followed closely by real estate (13.4%) and consumer products/services (12.2%).” There were fewer deals closed in the second quarter than the first quarter of this year, but the aggregate value of those deals closed in the second quarter is higher than the first.  And, in the same period last year, the second quarter of this year may have less deals closed, but it has significantly higher aggregate value. This shows continued expansion of the M&A market which is predicted to continue this [...]

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The Next Brightest Industries: Your Guide to Business Planning

Industry forecasts are helpful guides in analyzing future business trends. Business owners can take advantage of this information by using it to prepare for the best course of action that would benefit their company, and even help map out the business owner’s path beyond running his company. IBISWorld, the world’s largest independent publisher of U.S. industry research, has just come out with its pick of the top five most promising startup industries for the next five years. To come up with the list, IBISWorld reviewed over 700 industries and analyzed their revenues, growth trends and profitability levels to determine which ones look most likely to grow. Here are the industries: 1. Testing and Educational Support – The tough job market is having a positive effect on testing and education businesses in that college students are opting to stay longer in school, and those who have been laid off are going back to school. From five years before up to 2011, IBISWorld reports that the industry grew at an average annual rate of 6.2% to $15.4 billion. Related industries with similarly positive outlooks include  trade and technical schools, business coaching and employment recruiting. 2. Internet and Technology – Demand for technology has [...]

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Much Ado About the Donts of Selling Your Business – Part 3

eBusinessAppraisals.com presents the third and final installment of its tips on what not to do when selling your business. Part 3 of 3 | Part 1 | Part 2 7. Not allocating the maximum possible to goodwill [if it applies in some states, personal goodwill] – Goodwill is an intangible asset which is financially determined by the amount in excess of your company’s book value that a buyer would be willing to pay for to purchase it. For instance, the value of your assets might amount to $900,000 but the buyer pays you $1MM, the $100,00 would be the buyer’s recorded goodwill value. Goodwill can refer to various things that may not necessarily have an easily determined value, such as your brand, procedures unique to your business, a good location, and a customer list, but these add to the overall value of your business nonetheless. In short, goodwill contributes to the capacity of your business to generate your projected future earnings. 8. Allocating as much as possible to depreciation recapture and non-compete – Depreciation recapture is a tax law provision that maximizes tax revenue whereby the profit on the sale of a depreciating asset/s is reported as ordinary income instead of [...]

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Much Ado About the Donts of Selling Your Business – Part 2

eBusinessAppraisals.com continues to give business owners tips on what NOT to DO when selling their business. Part 2 of 3 | Part 1 | Part 3 4. Not employing the services of an expert investment banker to negotiate the transaction and an expert M&A attorney to close it – Having experienced professionals advise you and negotiate on your behalf should give you a sense of confidence that you are not short-selling your company, nor are you being shortchanged by a buyer. A team of professionals can see to it that you have prepared all the necessary documents, and they can review beforehand all the legal paperwork that you will need to sign to ensure the terms and conditions are agreeable to you and in pursuit of your best interest. You can rest assure that they can answer your questions about the transaction, and clarify anything you might not understand. They are worth every bit of their cost, and then some. After all, how could they not look after what’s best for your business when, most of the time, what they’ll earn will be a percentage of your business’s purchase price? 5. Mentioning price – Before going to market, you should have [...]

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