Here's How To Value Your Business

Understanding business valuation is an essential piece of business start up information that you need to learn as an entrepreneur. If you are considering starting a business or purchasing an existing one, you need to understand how to evaluate the value of a business, and here are a few things to consider about business valuation.

 

There are many different methods that you could potentially use in order to value a business. All of them have some legitimate points and a few weaknesses. Essentially, the value of a business is what someone else is willing to pay for it. Therefore, there is no hard and fast rule when it comes to valuing a business. You have to take several different approaches and weigh them against each other to come up with the closest thing to market value.

Book Value

One of the simplest methods of business valuation is using the book value. This is also sometimes referred to as net worth. With this approach, you are simply going to total up the assets of the company and the liabilities. You are then going to subtract the liabilities from the assets of the company. The value that you are left with is the value of the company. While this strategy is very simple, it leaves out a lot of other variables. For example, you are not taking into consideration the human capital or projects that you have in the works. 

Capitalization of Earnings

Another method that you could use to value a company is the capitalization of earnings method. This method is going to take a hard look at how much the company has earned in the past. You might look at a certain period of time, such as how much was made during the last fiscal year. You would then use a capitalization rate to determine how much the business is actually worth.

Economic Conditions

When you are evaluating the value of business, you are going to need to take a look at economic conditions. Most reports that come up with a business value start out by summarizing the current economic situation. During a good economy, the business is going to be worth more than it is during a down economy.

Total Approach

When you are trying to come up with an accurate value for a business, you are going to need to look at all of the different factors involved. Instead of looking only at the liabilities and assets, you need to factor in the employees, the patents that the company has, and anything else that could affect profitability.

While business valuations might not be at the top of your priority list as a small business owner, it is an essential component that you must understand...if you are really thinking long term. If you want to take your business into the big leagues, learn what the big guys know.

To learn more about the world of business finance, you can visit www.finweb.com 

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DON'T UNDERESTIMATE THE CASUAL MEETINGS

By: Adam Callinan

 

Building a strong network can be quite an art, one that is often built over years of trial and error, largely resulting in learning through many mistakes.

There are, however, an abundance of opportunities to garner help, connections and support from many of the people around you or that you have the chance to casually meet. You just need to open your eyes and learn to step outside your comfort zone to take advantage of these opportunities.

Here’s the deal: You have absolutely no idea who the person that you just met and are casually talking to knows or to where their experiences may lead. For example, I recently had a casual breakfast with a friend who brought another friend along that happened to live near me. There wasn’t a real purpose or premise for the breakfast aside from 'we live close by and should just know each other'.

Shut up and listen. It turns out, after an hour or so of listening -- note that I didn’t say talking -- I learned he’s been outrageously successful, having built and sold multiple behemoth companies. He's effectively taken over three struggling public companies as the CEO and completely turned them around, making them super profitable. I had no idea prior to having breakfast with him. Who do you think he knows or is connected to, aside from everyone you could imagine?

It’s a good idea to treat everyone that you meet as if they’re the most important person ever. Yes, there are major social benefits to this mentality, but remember that you only get one chance at a first impression.

Look local. Whether you’re building a new business or working inside one that is already moving along, you have no idea how many people you are connected to through people that you see and interact with constantly, largely because they’re casual interactions.

Are you in medical sales and trying to land that top doctor? I bet one of your neighbors knows him or her personally and you have no idea because you’ve never cultivated the relationship or, even more simply, just asked.

I’m not suggesting that you go door to door through your neighborhood and pester your neighbors for their contacts, but spend the time to better know those that you see and interact with regularly. If you have a solid relationship with them, don’t be afraid to ask for help or connections. Good people have a natural tendency to want to help other good people.

Garner respect. It’s also important to reiterate that you can’t ask someone for help or a connection that you don’t have a relationship with. Well, let me rephrase that -- you can but it won’t work and you’ll permanently burn that bridge. It’s really one of the most common mistakes new networkers make.

You must build trust and connection with the person first, because you need them to want to help you and trust that you’re not going to embarrass them when they introduce you to someone. If you are, however, focused on creating real relationships that are built on respect and have the potential to benefit both parties -- even if that’s just enjoying the interaction or from helping you -- you’ll be amazed at where your relationships can take you.