Business Valuation Blog | Understanding Buying / Selling a Company

Small Business Goals: Long Term Key Employee Retention

Posted by Business Valuation Specialists LLC on Aug 1, 2022 7:30:00 AM

Business Valuation Appraisals Employee Retention

One of the biggest challenges facing small businesses today is the ability to attract and retain key employees over the long term. Due to the COVID pandemic, employment practices have quickly evolved into a more challenging arena, especially with the next generation, of educated and talented individuals available in the workplace today.

Long-term loyalty with both your existing staff and new hires comes down not only to monetary compensation but will include other perks and incentives not considered in the past. Here are some topics to consider if you plan on hiring new employees or if you want to ensure current staff will remain in place in the foreseeable future.

Experience Levels

5+ years of experience is no longer the benchmark for potentially promoting from within or hiring new employees at an advanced level. As a business owner, you may need to consider 2 years, or even less in some cases, as the amount of experience candidates have under their belt.

Remote Working Environments

A lot of companies are seeing sizeable amounts of employee pushback when it comes to reassessing “in office” requirements over the past two years. Even hybrid models such as 2-3 days a week back within a larger group environment have been rebuffed by a lot of new and existing personnel.

You may need to consider easing these requests on a case-by-case basis and weigh the pros and cons of maintaining a flexible home or remote office option. Much of the younger generation of talent has quickly learned to excel in this format without losing the group office team concept, and for the youngest of these workers, this may be the only style they’ve known.

Overall Compensation

Planning for increased salaries and overhead on a year-to-year basis is becoming more commonplace today as entry and mid-level positions are necessitating higher pay levels in numerous industries. The minimum wage in many states continues to scale upwards making employee compensation an even bigger challenge. Consider including additional perks such as signing bonuses, profit sharing, 401K, and other benefits to stay ahead of the competition and engage the best talent available.

In summary, these are just a few of the challenges facing owners and company managers in today’s business environment. Staying one step ahead of the game by being innovative in your promotional and hiring policies will allow you to maintain key employees that are critical to short and long-term success.

Tags: business valuation services, key employees, employee retention

Small Business Goals: Easy-to-Manage Online Presence Across Platforms

Posted by Business Valuation Specialists LLC on Jul 18, 2022 7:30:00 AM

Business Valuation Appraisals Online Presence

One of the biggest challenges for many small business owners is effective marketing which ultimately drives sales volume. Whether you’re a local company that tends to rely on word-of-mouth referrals or a nationwide operation looking to grow, one of the most effective tools available to you is your online presence.

There was a time when folks used to look in the newspaper or phonebook to locate what they were looking for. Those days are long gone. Potential new clients who want to utilize your service or purchase the type of goods you provide, will almost always turn to an online search engine first and type in a phrase or handful of keywords to describe what they need to find. For this reason, every small business today needs an effective and attractive online presence, where new content is being actively posted and updated, to maximize the benefits of this powerful marketing tool.

Consider engaging with a company that combines a web-building content management system (“CMS”) with a customer relationship management (CRM) system. Doing so can be very beneficial for a small business because you can aggregate web design, development, data tracking, lead generation, eCommerce functionality, and even social media marketing efforts saving you time and money in the long run. Many have the ability to add customized code and APIs so you can make your brand stand out. The best ones offer robust reporting abilities giving you a real-time look at your online performance across platforms and allowing you to make adjustments quickly and easily.

Look internally to your employees to determine if any may have the skills required to assist in developing or upgrading your website using a CMS or can oversee and manage the data coming in from a CRM. Keeping these functions in-house will save you money and afford you more control in the long run. If you need to engage an external business be aware the cost of using outside services can be significant. Budgeting and planning will be vital throughout the process as well as gleaning a clear understanding of the overall cost vs. annual revenue growth projections.

There are many key decisions small business owners make every day. When it comes to creating the optimal platform to maximize sales, the development of an attractive, effective online digital presence combined with a good quality CRM can be one of the most important ones, offering long-term growth opportunities that fit your goals and allow you to make the best investment decisions impacting the future success of your business.

Tags: valuation, business appraisal services, small business, online presence

SBA Backed Business Loans - Know Their Appraisal Requirements

Posted by Business Valuation Specialists LLC on Jul 5, 2022 7:30:00 AM

 

Business Appraisal Appraisers SBA Loan

The SBA (Small Business Administration) loan programs have become even more prominent over the past few years as companies continue to recover from the pandemic and battle continuing economic and sustainability issues. For those who have thrived in spite of these challenges, the need for favorable loan conditions to handle growth needs, such as working capital access, is critical to future success.

While working with your primary financial institution, who should act as the intermediary for your SBA loan application, make sure you understand all of the approval requirements, including the need to obtain appraisals. Depending on the type of company you own, the size of the loan request, and available collateral such as real property, equipment, and liquidity (cash and receivables), you may need to engage with independent appraisers to provide the SBA with accredited, certified valuation reports for any or all of these components to your business.

During the application process with your lending institution, gain an understanding of these requirements early on as it will take time to find the best appraisers for the job. Turnaround time, responsiveness, and flexibility should all be factors to consider when engaging a valuation expert. Don’t sacrifice any of these variables based on a cheaper option, as the decision may come back to bite you. The valuation results may be poorly determined, the process may drag out interminably, and the SBA could even deny the validity of the reports if you engage with an inexperienced, unprofessional appraiser.

The SBA may require only a tangible asset appraisal, for your building, land, and equipment. Other scenarios would reveal a need for an overall business valuation, which would consider all the assets of the company, as well as an income and market analysis.

In either case, the more prepared you are at the outset of the process, the better chance of a satisfactory result and efficient approval process. Obtaining the capital you need at the right time can save you thousands of dollars in both the short and long term, while the application and approval process can be overwhelming. The best appraisers understand all this and will work with you to ensure they facilitate their role in the process, as opposed to hindering it. Don’t forget to rely as much as possible on your direct lender, as they may be able to recommend the right professionals to work with.

Tags: Business Appraiser, appraisal, SBA Loan, business valuation services, SBA Loan Business Appraisal

Small Business Challenges: Inflation Rises While the Economy Stumbles

Posted by Business Valuation Specialists LLC on Jun 20, 2022 7:30:00 AM

 

Business Valuation Appraisals Small Business Challenges Stand OutIn the small business arena, where the vast majority of US companies compete, there always seem to be new challenges and obstacles confronting many owners and employers each year. This couldn’t be any more evident than what we’ve all experienced over the last 2+ years as COVID-19, supply chain crises, inflation, shifting energy market policies, the Russia/Ukraine War, investment market downturns, and unreliable messaging have all impacted small businesses in one way or another.

Through all these developments, it seems small businesses are the ones left to fend for themselves while large corporations leverage these issues for their own gains. It might be easy to listen to all the noise and share in the complaining, however, wouldn’t it be more advantageous to focus on your company’s specific challenges, while carving out new paths to stay profitable and find growth opportunities while others are being overly reactive?

While all these compounded issues have created very significant challenges for many small business owners, many have faced these types of hurdles in the past, whether from revenue and cash flow reduction, vendor price increases, delivery delays, or employee and client retention. The most successful small business owners are continuously looking for ways to refine and improve their business practices, even in the best of times. Being proactive on a day-to-day basis while continually posing relevant questions to yourself, your peers and employees will allow you to stay ahead of the curve and be prepared when these challenging issues arise.

Don’t be afraid to take risks and invest in areas where you see new opportunities for growth or greater operational efficiencies can be developed. Challenge the rest of your team to do the same and humbly realize the more support you have from loyal employees who can assist in these efforts, the better.

Consider being a unicorn, and dare to make decisions that appear unconventional today, but could turn out to be revolutionary tomorrow. The less alike you are to the rest of your competition in certain value-added areas could easily have a positive effect on how clients view your products and services compared with those in your market. Improved communications, deliverable timelines, and customer service are just a few examples to consider.

These changes will likely create more demands on you as a business owner, as well as your employees, however, the eventual payoff can be critical in overcoming the sum total of the challenges faced as a result of the external forces affecting your business.

Tags: small business valuation services, small business, challenges, opportunities, stand out

Consultants: A Necessary Evil or a Facilitating Factor?

Posted by Business Valuation Specialists LLC on Jun 6, 2022 7:30:00 AM

 

Business Valuation Appraisals Appraisers Business Consultants

Consultants are oftentimes viewed as a necessary evil to accomplishing the larger goal of ensuring one has all the information needed to make the wisest decisions in a business or personal transaction. Without them, you may be led down the wrong path by a biased source or someone without the knowledge and experience to provide you with the leverage needed to make informed choices.

Typically, consultants are engaged in transactions where both independence and expertise are critical to a successful outcome, whether that be in a financial endeavor, business combination, professional dispute, arbitration, or litigation proceeding. Accountants, appraisers, insurance advisors, statisticians, and legal experts, to name a few, are engaged by one or both parties in a situation where there is a significant need to comply with regulations, and settle cases where disagreement on key issues is apparent.

The answer to the question in this article's title lies predominantly with the individuals you choose to work with.

Ask yourself the following when considering engaging with consultants:

  • Does the consultant fully understand the larger picture in play, and can they keep this perspective while focusing on their specific role?
  • Can they remain fully independent in the case at hand, regardless of who hires them?
  • Does their experience and expertise fit with the specifics of the transaction or dispute?
  • Are they accredited and/or certified as a professional in their practice?

The most effective consultants understand their role in each unique situation and can work seamlessly with the parties involved, without trying to influence areas in which they are not requested to participate.

Credentials on paper can speak to much of this, however, a more personal vetting process should complement the review process, to ensure you are bringing the right consultants to the table. Don’t necessarily prioritize cost over quality, as it may come back to haunt you down the road.

In the end, a strong team assembled to accomplish the specific goals of any transaction or business dispute settlement will likely avoid a lot of unplanned costs and damages in the long run, and lead to an equitable outcome.

Tags: valuation consultant, valuation of a business, business appraisers, consulting, consultants

Small Business Service Providers vs. Product Manufacturers

Posted by Business Valuation Specialists LLC on May 23, 2022 7:30:00 AM

 

Business Valuation Appraisal Appraisers Products vs Services

There are distinct differences between companies that provide a third-party service to their clients versus those which create products for sale to other manufacturers or end-users. Examples of service providers would be banks, financial advisors, insurance companies, vehicle repair shops, salons, spas, hotels, medical facilities, consultants, and appraisers. These services would be considered intangible goods.

Product manufacturers create tangible goods from raw materials while selling at a wholesale or retail level, depending on the end product and client base. They may act as a parts manufacturer for a larger manufacturer, such as automotive or aerospace companies. Others may produce end product goods that are sold in stores and other retail outlets. Sporting goods, furniture, clothes, food, and health supplements to name a few.

Some service providers may also offer tangible products that complement their business, however, these products are typically manufactured by other companies, and so act merely as a retail outlet to these producers.

Besides the obvious distinction between products and services, other variances of note would be how these companies are affected by changing markets and economies.

Manufacturers are oftentimes reliant on other companies who produce the raw materials necessary to build their products. Therefore, supply chain issues such as those faced today can have a negative impact on their ability to maintain normal levels of production. Even if supplies are available, prices may increase from their suppliers dealing with these issues, which will lead to price increases or cost-cutting concerns to maintain market share.

Service providers typically don’t face these supply chain issues, however, in an inflationary economy such as we have today, their customer base may decide to hold off on spending the money for their services, creating challenges to maintaining or growing revenues.

For small businesses, these types of challenges are always present, however much more so than in the last 2+ years of unprecedented global and local economic concerns. To survive and even thrive in these environments, regardless of the challenge, takes a savvy business owner who can think both short and long term to create opportunities where others see roadblocks.

Understanding the most critical components affecting your business, year in and year out, whether your company is a service provider or manufacturer is the first step toward realizing solutions to combat these challenges. Making adjustments without sacrificing integrity or quality is the key to becoming a long-term successful business. There will come a day when the world looks much brighter, so do what you can to prevail in today's battles, so you can win the war.

Tags: small business valuation services, tangible, intangible, services, products

Are Current Economic Conditions Affecting Your Small Business?

Posted by Business Valuation Specialists LLC on May 9, 2022 7:00:00 AM

 

Business Valuation Appraisal Small Business Opportunities

There will always be differing opinions as to why the US, and the world in general, are facing significant challenges from inflation, supply chain delays, post-COVID hangovers, and many other economic factors that may have a negative impact on your family. If you own a small business, these issues can also impact your revenue and cost structure while creating new concerns you have never faced before.

In some cases, I have seen opportunities arise from these challenges, going back to the start of the pandemic. Savvy business owners have taken advantage of new markets during these difficult times, while others simply had no alternative options other than attempting to outlast the downturn. These latest economic issues appear to be seeping into every industry and business, from technology to energy to food markets, with no short-term solution in sight.

Regardless of the type of business you own and the effects the economy has taken on it, it might be a good time to consider reevaluating your company, given the recent changes that have occurred as a result. Taking a hard look at the state of your business can provide you with the ability to adjust course in certain key areas where revenues and expenses are concerned.

As we have all seen from past experience, there is always a light at the end of the tunnel, regardless of how long and dark it may be. Planning ahead with a strategically revised business plan, starting with a current assessment, can proactively put you in front of the competition.

Your future success and that of your business can, in part, hinge on creating new ideas that will open up opportunities created by these downturns. While many will continue to gripe and complain about the state of the world and how it negatively affects their livelihood, you can look to be one of those who seize the moment through insight and careful planning.

Tags: small business valuation services, valuation of a business, certified appraisal, Economic Environment

Small Business Appraisal - The Better The Data, The Better The Result

Posted by Business Valuation Specialists LLC on Apr 26, 2022 10:00:00 AM

 

Business Valuation Appraisal Small Business Data Appraiser

One of the biggest challenges small business owners face is keeping track of all their records for sales, costs, and everything in between. Being organized is critical when it comes time to value your company for a sale, new investor, or any other reason. It will require a lot of information be given to a certified appraiser, who needs to understand the details behind the numbers.

Tax returns, income statements, and balance sheets are the most common types of documents recorded annually, however, these figures may not tell the whole story as the value of your business is determined. Certain expenses will be fixed, while others may be variable and discretionary, which should be discussed with the appraiser so they can make adjustments to the bottom line that otherwise might be missed.

Is it important for you to understand the value of certain tangible and intangible assets as part of the appraisal? The business appraiser will rely on your depreciated tangible asset levels unless you can provide recent equipment or real estate fair market reports, which may show considerably higher figures. Some appraisal firms have the capability of valuing these tangible assets concurrently with the business appraisal as part of the overall project.

Intangible value will normally be picked up within the general goodwill category. If you believe there is significant worth to specific assets such as; customer relationships, contracts, trademarks, patents, websites, or similar intangibles, you will need to provide details that can be supported by revenue streams and related data.

It is important to not only provide the appraiser with as much realistic backup data as you can but to also stay involved and be available to answer questions that may arise during the valuation analysis. These tactics will lead to an optimal outcome while supporting reasonable conclusions for the overall value of your business.

Tags: small business valuation services, valuation services, how to determin the value of a business, valuation of a business

Appraising Closed Companies for Tax Discharge and Dissolution

Posted by Business Valuation Specialists LLC on Apr 11, 2022 7:00:00 AM

Business Valuation Appraisal Business Closure IRS Discharge and Dissolution

In the aftermath of the pandemic and in consideration of continuing economic hardships for many businesses in highly affected industries, such as restaurants and entertainment venues, the reality is that a lot of companies did not survive. These unprecedented times saw a large increase of small business owners struggling to stay afloat in hopes of a turnaround that ultimately took too long to come about.

Despite short-term relief funding programs made available by federal and state governments, there has been a significant increase in small business closures beginning in mid-2020 and continuing to this day. One of the many obligations business owners are required to undertake when closing their company involves a formal discharge and dissolution filing with the IRS.

There are several filing forms involved and depending on the existing documentation, owners may need to engage with a certified business appraiser to independently declare a final value for tax purposes. Even though it is evident that little to no revenue is being generated from business operations, there likely remain certain assets and liabilities which need to be declared as part of these final steps.

As painful as it may be, a business appraiser will need to be engaged and review these documents as part of their work effort to establish a fair net value for the remaining tangible and intangible property. Essentially, the focus is on what remains of the business that can be resold as part of the closure.

In many cases, this would be tangible property only, such as real estate, buildings, machinery & equipment, and personal property. If these assets have recently been appraised or are reasonably depreciated and accounted for on the company books, the business appraiser can use this data to document under an Asset Approach to value. This approach will likely be the only one utilized given the lack of income and external market comps considered under more normal business valuation circumstances.

Other factors will be taken into consideration that pertain to the closure status which will hopefully soften the final blows that come with this process. Making the decision to close your small business for lack of profitability, or for any other reason, can be a heartbreaking experience, and as business appraisers, we will do all we can to facilitate this process for small business owners during these trying times.

Tags: business valuations, business appraisers, Appraisal for Tax Purposes, closed business

Business Valuation Consulting

Posted by Business Valuation Specialists LLC on Mar 28, 2022 7:00:00 AM

Business Valuation Appraisal Consulting Review of Work

Our blogs primarily cover topics related to the appraisal of small businesses however, there are other options for owners who may be in the middle of a potential purchase, sale, investor buyout, or dispute where a recent valuation exists, and there is a need to obtain an independent opinion on the reasonableness of the conclusions in the report.

This is considered a consulting or review engagement where a certified business appraiser will review relevant documents, and provide opinions as to the approaches, methodologies, and conclusions developed to arrive at a value for the company.

Review work is a more informal process where the consulting valuation professional will develop opinions of work already completed and potentially offer alternative perspectives as to valuing the business. Ultimately, they may determine if an adjustment is warranted to the value concluded upon in the report while providing support as to why; or they may state that the appraisal was well conducted and the value conclusion credible.

The review appraiser may also provide an opinion as to the credentials of the appraiser and the overall quality of the written report from a compliance perspective.

Much of the work that goes into a valuation review and consulting assignment is consistent with completing a business appraisal, given the need to support why the existing report conclusions may be reasonable or not. The primary difference is that the review appraiser is not completing a formal, certified appraisal report of their own. A preliminary opinion of value may be presented as part of the deliverable, in the context of the work performed and documents reviewed however, it would not be considered a certified appraisal.

In summary, these types of engagements can be useful anytime there is a concern regarding the reliability of existing appraisals being used as part of a business transaction or in settlement efforts for a buyout or dispute. The consulting assignments are quite common in the valuation industry and offer an alternative option to business owners in situations where a completely new valuation report may not be necessary.

Consider engaging with an experienced certified appraisal professional when you enlist this type of work to ensure you receive a supportable, well-researched analysis, that provides the additional independent perspective needed to make the most informed decisions.

Tags: Business Valuation, business appraisal, business appraisers, business valuation services, review, consulting