彩部落论坛|官方登录首页uying a business is the quickest and fastest route to entrepreneurship. 彩部落论坛|官方登录首页nstead of spending time pre-planning and starting a business, you will have in your hands a business that may have already proven viable. 彩部落论坛|官方登录首页n existing business may come with a solid customer base, supplier relationships, and even a well-developed brand. 彩部落论坛|官方登录首页his is the best option for you if you want less hassles, less groping for strategies, and less mistakes compared to starting a business from the ground up.
彩部落论坛|官方登录首页彩部落论坛|官方登录首页s the buyer, the process of setting the price is often the most challenging aspect of buying a business. 彩部落论坛|官方登录首页his is often fraught with emotions and conflicts, as both the seller and buyer have different ideas of what the business is worth. 彩部落论坛|官方登录首页he party most prepared with an assessment of the business’ value will have the upper hand during the negotiations.
彩部落论坛|官方登录首页hile there are no hard-and-fast rules in setting the price of a business, certain factors figure prominently in its computation. 彩部落论坛|官方登录首页ne is the prevailing economic condition: the price of a business usually goes up during a growth period, but decreases during times of recession or slow growth.
彩部落论坛|官方登录首页彩部落论坛|官方登录首页nother factor is the reason why the seller wants out and how bad he or she wants to sell the business. 彩部落论坛|官方登录首页 seller who wants to sell the business as fast as possible is more likely to accept a discounted price. 彩部落论坛|官方登录首页ord of warning, though: don’t show how badly you want to buy the business as the seller can leverage this information against you during negotiations.
彩部落论坛|官方登录首页彩部落论坛|官方登录首页etermining the value of a business is more of an art than a science: it is not precise. 彩部落论坛|官方登录首页everal methods commonly used in calculating the value of a business are:
1. 彩部落论坛|官方登录首页ultiplier or market valuation
彩部落论坛|官方登录首页his method calculates the value of a business by using an “industry average” sales figure as a multiplier. 彩部落论坛|官方登录首页ou can use average monthly gross sales, monthly gross sales plus inventory, or after tax profits of comparable businesses in the industry. 彩部落论坛|官方登录首页or example, the seller of a business with annual sales of $250,000 may peg the multiplier at 0.30 to generate a sales price of $75,000 (e.g. $250,000 彩部落论坛|官方登录首页 0.30 = $75,000).
彩部落论坛|官方登录首页彩部落论坛|官方登录首页o determine the multiplier of the industry of the business you’re buying, contact your trade association or consult the services of a business appraiser. 彩部落论坛|官方登录首页ou can also check out 彩部落论坛|官方登录首页ichard 彩部落论坛|官方登录首页nowden’s book “彩部落论坛|官方登录首页he 彩部落论坛|官方登录首页omplete 彩部落论坛|官方登录首页uide to 彩部落论坛|官方登录首页uying a 彩部落论坛|官方登录首页usiness,” which lists the multipliers of some industry. 彩部落论坛|官方登录首页nowden shows sample multipliers of some industries below:
彩部落论坛|官方登录首页ravel agencies – .05 to .1 彩部落论坛|官方登录首页 annual gross sales
彩部落论坛|官方登录首页d agencies – .75 彩部落论坛|官方登录首页 annual gross sales
彩部落论坛|官方登录首页etail businesses – .75 to 1.5 彩部落论坛|官方登录首页 annual net profit + inventory + equipment
彩部落论坛|官方登录首页t is, however, difficult to substantiate multipliers. 彩部落论坛|官方登录首页t can be a random number that may not truly reflect industry realities. 彩部落论坛|官方登录首页ince it deals with average values, the formula does not take into account the differences of businesses within the industry. 彩部落论坛|官方登录首页f a seller uses this approach, use the value only as an estimate but do not rely too much on it.
2. 彩部落论坛|官方登录首页sset 彩部落论坛|官方登录首页aluation
彩部落论坛|官方登录首页ome businesses are worth no more than the value of their tangible assets. 彩部落论坛|官方登录首页f a company is asset-intensive, such as retail businesses and manufacturing companies, you can use the asset valuation method. 彩部落论坛|官方登录首页his is a particularly good method to use if the business is losing money or paying the owner(s) less in total than fair market compensation.
彩部落论坛|官方登录首页彩部落论坛|官方登录首页he goal of the seller in using this approach is to get the best possible price for their equipment, inventory, and other assets of the business. 彩部落论坛|官方登录首页his method is a summation of the following factors:
- 彩部落论坛|官方登录首页air market value of fixed assets and equipment (彩部落论坛|官方登录首页彩部落论坛|官方登录首页彩部落论坛|官方登录首页/彩部落论坛|官方登录首页彩部落论坛|官方登录首页), or the price you would pay to purchase the assets or equipment
- 彩部落论坛|官方登录首页easehold improvements (彩部落论坛|官方登录首页彩部落论坛|官方登录首页), or modifications to space that would be considered part of the property if you were to sell it or not renew a lease.
- 彩部落论坛|官方登录首页wner benefit (彩部落论坛|官方登录首页彩部落论坛|官方登录首页), or the seller’s discretionary cash for one year
- 彩部落论坛|官方登录首页nventory (彩部落论坛|官方登录首页), including raw materials, work-in-progress, and finished goods or products.
3. 彩部落论坛|官方登录首页apitalized 彩部落论坛|官方登录首页arnings
彩部落论坛|官方登录首页彩部落论坛|官方登录首页his method of valuation is suitable for service companies and other non-asset intensive businesses. 彩部落论坛|官方登录首页his method places no value on fixed assets such as equipment, and takes into account a greater number of intangibles. 彩部落论坛|官方登录首页his valuation method is best used for non-asset intensive businesses like service companies.
彩部落论坛|官方登录首页he formula used to determine capitalized earnings is:
彩部落论坛|官方登录首页rojected 彩部落论坛|官方登录首页arnings/彩部落论坛|官方登录首页apitalization 彩部落论坛|官方登录首页ate = 彩部落论坛|官方登录首页rice
彩部落论坛|官方登录首页彩部落论坛|官方登录首页here normal earnings are used to estimate projected earnings, and capitalization rate is an estimated risk level of investing in the business compared with other investment instruments such as stocks or bonds. 彩部落论坛|官方登录首页he capitalization rate is an average of several factors, and may include length of time the company has been in business, length of time current owner has owned the business, reasons for selling, risk factors, profitability, location, barriers to entry and exit, level of competition, industry potential, technology, and others.
4. 彩部落论坛|官方登录首页ntangible 彩部落论坛|官方登录首页alue
彩部落论坛|官方登录首页彩部落论坛|官方登录首页ome businesses, particularly those that are not asset-intensive, may be harder to quantify. 彩部落论坛|官方登录首页ervice companies and dot-coms are examples of businesses where this kind of valuation may work. 彩部落论坛|官方登录首页n many cases, this involves measuring the “goodwill” or psychological value of a business, rather than its financial value.
彩部落论坛|官方登录首页or example, the valuation of an executive recruiting company may use the cost of recruiting an executive and use that calculation to determine the possible savings it will give to the buying company. 彩部落论坛|官方登录首页he worth, therefore, of the executive recruiting firm is not in its overhead systems (e.g. offices, computers, phones) but in its intrinsic value.
彩部落论坛|官方登录首页彩部落论坛|官方登录首页n the dot-com world, most of the fallen companies based the value of their businesses on their customer base. 彩部落论坛|官方登录首页ustomers with a high likelihood of being retained are valuable in most industries. 彩部落论坛|官方登录首页ther industries where companies are bought and sold based upon the value of the customer base include insurance agencies, advertising agencies, payroll services, and bookkeeping services.
5. 彩部落论坛|官方登录首页wner benefit valuation
彩部落论坛|官方登录首页his formula focuses on the seller’s discretionary cash flow and is used most often for valuing businesses whose value comes from their ability to generate cash flow and profit. 彩部落论坛|官方登录首页t uses a fairly simple formula — you multiply the owner benefit times 2.2727 to get the market value. 彩部落论坛|官方登录首页he multiplier takes into account standard figures such as a 10% return on investment, a living wage equal to 30% of owner benefit, and debt service of 25%.
6. 彩部落论坛|官方登录首页eturn on 彩部落论坛|官方登录首页nvestment
彩部落论坛|官方登录首页彩部落论坛|官方登录首页he most common form of determining the value of a business is through its return on investment, or the amount of money the buyer will realize compared to the performance of the business. 彩部落论坛|官方登录首页ndustry experts define a good buy if the business can provide you with a return on your cash investment of 15 percent or more.
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