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Goods and Services Marketers: Why Many Target Millennials Today

Posted by Business Valuation Specialists LLC on Mar 14, 2022 7:00:00 AM

Business Valuation Appraisals Appraiser Millennials Future Business

Believe it or not, Millennials are now in their late 20s and 30s and have become the most sought-after consumers of products and services for most commercial providers across all industries. Gen X and late-stage Boomers are still in the picture, however, over the last couple of years, it has become evident Millennials are making tremendous strides in gaining buying power due to a variety of circumstances.

In the valuation world, I have recently seen a growing number of young entrepreneurs and next-generation family members running companies with fresh perspectives that can’t be ignored, and will likely set the pace for the next 20-30 years of business development across the world. Many of these individuals have patiently bided their time during unprecedented events that have forever reshaped our future over the past few years.

Others have mocked them in the past for their habits and preferences, while underestimating their potential, and not realizing the vast majority of this generation are nothing like the stereotypical picture painted by so many who are engrained in “old school” mentality.

While it is generally true that Millennials had a tougher time breaking into the mainstream workplace a decade ago in a much different business landscape, they used conservative tactics in an effort to save money, such as living at home and holding off on marriage and family plans until more financially secure. This is somewhat of a unique circumstance created by this generation, however, we are now seeing the emergence of a hungry, wizened group that accounts for over 20% of the populace, well over $2 trillion in spending power, and 90+% employed.

Virtually every major entertainment event, both live and virtual, sees its advertising revenue campaigns geared toward these consumers, while the majority of the workplace is inhabited by those that fall into the Millennial generation. These trends, which have quickly grown over the last 5 years, are the building blocks for the future leadership of our nation’s business, economic, and political climate. It is not a surprise then, that this generation is becoming the focus of many service industries and product developers who realize that staying ahead of the competition will equate to favorable ratings from this group of individuals.

Millennials are the original masters of social media, and with venues such as Twitter, Facebook, LinkedIn, and Instagram becoming dominant platforms for advertising, it makes total sense that the two are becoming entwined with how future businesses will be run.

In summary, if you own a small business, and are looking for growth opportunities that have otherwise been difficult to develop, consider targeting the Millennial generation as a potential expansion to your client base, and look to keep up with this new and exciting group as they continue to take over the future.

Tags: business appraisal services, business valuation services, marketing, millennials, future, business owners

Can Your Business Afford to Keep Employees Working Remotely?

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

Business Valuation Appraisal Appraiser Remote Work Shift

If ever there was a light at the end of the COVID tunnel, it may be at its brightest today, however, the topic of broad-based remote employees becoming a permanent way of life has been discussed for a while now. Do you find your business in the middle of this challenging issue or is your company fully reliant on in-person employment to operate

Businesses involved in markets such as manufacturing, packaging, and logistics will always need certain employees on the “factory floor”, while service providers such as advertising agencies and accounting firms are finding it easier to allow a majority of their workers to have the option for remote or home offices, either part or full time. So many things we used to do in person can now be conducted remotely and virtually.

The fact is that the in-office, in-person dynamic is becoming a thing of the past, and while many employers are compelled to increase full-time remote workers, there are many challenges for both business owners and employees with this shift in the workplace.

From personal experience, I can confidently say that, for some people, it takes a long time to effectively and efficiently work from home, or in a remote office setting, with no hands-on supervision. There are dozens of ways to waste time and become distracted by influences completely outside of your job responsibilities. Working remotely can also hinder the ability to develop the kind of camaraderie many office environments afforded people in the past, which can be beneficial to creating a team dynamic and improving the business social skills of your employees.

That said, this shifting workforce dynamic is now considered the new normal and will continue to trend this way for many businesses in the foreseeable future. Employers will need to be more diligent in their hiring practices and employees should consider ways to eliminate distractions and develop habits which to balance home office work with some level of in-person company interaction.

Many business experts believe employees have all the leverage in the current market and that likely holds true for certain qualified skilled candidates. Most employers however are not naïve or desperate enough to allow their new hires to call all the shots. Career success inevitably comes down to overall work ethic, open-mindedness, and the ability to develop leadership skills while working in a team environment and ultimately becoming more effective than your peers. Employers now more than ever, should look to hire those with strong social skills, work ethic, and flexibility to go along with the technical skills necessary to do the work.

It will be interesting to see how the remote office shift in the workforce further evolves and how employers and their staff continue to adjust without sacrificing quality and efficiency and avoid a loss in overall business value.

Tags: business appraisal, appraisal, business valuation companies, business valuation appraiser, remote work, remote employees

Subcontracting vs. Adding Employees - How to Decide What is Best

Posted by Business Valuation Specialists LLC on Feb 14, 2022 7:00:00 AM

Business Valuation Appraisal Company Growth Hiring Subcontracting

Business owners who are enjoying steady growth over time with their sales volume moving ever upward will eventually need to determine whether it makes sense to subcontract out the extra work or consider bringing in a new hire on a part-time or full-time basis.

This decision depends greatly on the type of business you own, in that certain jobs involve tasks that can be accomplished from home or in the field, while others require the need to train and work within an office or factory environment.

For instance, as a business valuation and equipment appraisal firm owner, much of the time-consuming work for my employees revolves around field inspections and market research, while maintaining strong customer relationships and meeting delivery timetables. These job responsibilities lend themselves to working offsite in the field or from home.

Here are some other factors to consider:

  • What are the maximum capabilities of your current staff? Can you structure an improved compensation plan for existing employees to benefit from this growth while not overtaxing them or potentially creating a lesser quality product or service given the extra work demands?
  • This option should probably be considered and vetted before any others, as your personnel will appreciate the opportunity for growth. It will also help maintain positive morale if you ultimately determine the need for extra hires or subcontracting.
  • Are you confident that your growth is a consistent pattern that will continue to develop or, could it be a short-term aberration due to unique circumstances in your market? It’s always a good idea to look back over the last 3-5 years of revenue and determine what created this growth and if there are inconsistencies or steady patterns to your sales.
  • If you determine there is a strong chance the increase in revenue will continue in the foreseeable future, hiring full or part-time in-house will need serious consideration.
  • How much training is required for subcontractors or new employees, and can you afford to bring in a seasoned professional who will immediately take the ball and run? Depending on your overall role in the business, you may have the time to train lesser groomed staff or freelance help however, if this is not the case, you may need to consider spending the extra capital to engage someone with extensive experience.

There is always risk involved when bringing in additional human resources. Taking a leap of faith with new hires or subcontractors can help ease the pressure and help you better manage growth leading to prosperous future outcomes, where the sky becomes the limit.

Tags: business valuation services, subcontracting, hiring, growth

Completing a Business Appraisal for a Startup Company

Posted by Business Valuation Specialists LLC on Jan 31, 2022 7:00:00 AM

Business Valuation Appraisal Startup Company

Most business valuations involve a review of historic financial statements and current assets, with a comparison of existing competition for similar businesses in your market. The requirements change, however, when you have a startup operation that has yet to earn a single dollar and is still in its infancy.

Of the many decisions that you will be making during these early stages, how best to provide documentation as to the future value of your business to potential investors, such as private equity and your existing banking relationships, will likely be at the fore. Before you spend every dime of your own investment savings, you will want to consider alternate sources of working capital with these partners.

One of the tools you will need to independently support the value of your startup is a certified business appraisal. Without the existence of historic financial data, the appraiser will rely instead on your forecasted business plan, which will include projected revenue and expenses, as well as the tangible and intangible assets you have already purchased, or plan to acquire in the immediate future. These growth models are typically built over an initial 5-year period, and structured similarly to how typical financial statements and balance sheets are prepared by accountants.

The appraiser will utilize these forecasts to consider the value of your business today, assuming the business plan is realized while discounting the income streams using accepted methodologies for startups within your market and industry sector. They will also compare your growth plans to competitors in these markets who have similar businesses, to ensure the forecasts are in a reasonable range.

It is important to balance common sense reality with your aggressive growth plans, to ensure these potential investors, and your appraiser, are comfortable there is a good chance of success and that the forecasts are in line with existing successful companies. Many startups fail for any number of reasons, but two of the most common are poor planning and overly confident forecasts.

If you can find the right partners, who share your vision, while keeping checks and balances of the plans in place, and there are well-researched, realistic goals set, the chance of success will be much higher. Add a bit of patience and endurance into the mix, and you can set yourself up for the best opportunity of developing a profitable business for years to come.

Tags: Business Appraiser, certified appraisal, business valuation services, startup, startup company

7 Reasons To Obtain an Appraisal During a Business Transaction

Posted by Business Valuation Specialists LLC on Jan 17, 2022 7:00:00 AM

Business Valuation Appraisal Appraiser Reasons

As a business owner, there are many reasons why you may want to determine the actual value of your company. Here are some of the more common ones:

Business Sale

This is probably the primary reason a business valuation is needed. The sale of your company shouldn’t be finalized without an understanding of value. This will assist in negotiations and provide an independent analysis that both parties can agree on.

Ownership Transfer

You've put a lot of time and effort over the years operating your business, growing it into what you know is a strong successful continuing enterprise. One day you look up and realize it’s time to consider retirement or, at the least, take a step back and let the next generation take over the reins. To properly transfer ownership under this type of transaction requires a business appraisal to accurately reflect the value and determine a fair process to accomplish this final business goal.

Partnership Dissolution

Whether this involves a senior or minority shareholder stepping down or a personal divorce that needs to be settled, each party wants to realize a fair shake in the process. To avoid one side or the other trying to inflate or depress the actual value of the business, obtaining an independent appraisal will provide a solution.

Estate Settlement

When a business owner or senior partner passes away, it is an emotional situation. This can be further complicated when there are multiple investors and heirs to the business, some of whom may have different goals as to their settlement of shares. Some may want to liquidate the company, while others may want to continue forward and take over operational control. Engaging with a certified business appraiser to value the company and determine partial ownership interests can assist in settling all of these possibilities so the business and shareholders don’t suffer.

Merger/Acquisition

If your business is being rolled into a larger company as part of a merger or acquisition, the due diligence process will involve an appraisal of the business and its underlying assets. There are formal accounting principles and guidelines in place to complete this effort that an appraiser will follow to ensure the transition goes smoothly.

Going Public

If an IPO (Initial Public Offering) is in your future plans, after years of operating privately, you will need to determine value based on a targeted share price. There are a number of valuation techniques that can be used to compare your currently private company to a public one, allowing an appraiser to determine value and price those shares at a rate that is reasonable in the open market.

Liquidation

There may come a time when the business is not operationally profitable, and all forecasted redevelopment plans have been exhausted. In this case, a liquidation of the company will need consideration. Understanding and estimating the value of the company’s assets will be the primary driver in this circumstance, ideally with the purchaser giving some consideration for future operations.

Regardless of the reasons why a business valuation is needed, ensure you engage with a certified experienced appraiser that can work with you to facilitate a successful outcome.

Tags: business appraisal, small business valuation services, reasons for business valuations

Approaches and Methodologies Considered When Appraising Your Business

Posted by Business Valuation Specialists LLC on Jan 3, 2022 7:00:00 AM

Business Valuation Appraisal Methodologies Appraiser

Business owners likely have particular ideas about the value of their company and how best to calculate it, given their experience and knowledge of their financial history, and understanding of the market and industry in which they operate. When you need to formally engage an experienced, certified business appraiser to value your company, it's important to understand the standard accepted approaches they consider and weigh during the process.

There are three approaches to business valuation, namely the Income Approach, the Market Approach, and the Asset Approach. Each of these methodologies can be broken down further and considered based on the type of business you own, available data to analyze, and the company’s current operational status. Here is a brief summary:

Income Approach

The income-based approach has two primary methods that take into account whether the business income is steady or inconsistent. Essentially, the company's income is measured over a period of time to determine its overall value. Under a “Capitalization of Earnings” approach, the appraiser will consider both historic and future income probability, based on a steady stream of revenue, and discount these streams to realize a net present value, while using appropriate rates of capitalization.

Under the “Discounted Future Earnings” approach, the appraiser will estimate value primarily from future income probability, or forecasts, over a fixed period of time, to a terminal value, and discount this back to the present

Market Approach

>The Market Approach determines business value where the subject company being appraised can be compared to available businesses traded in the public marketplace. Adjustments are made to better match the private business based on revenue and overall size.

These guidelines are either investor-driven or transactional, depending on the data available. For example, a similar publicly-traded company may have available the price investors paid for minority interests in that company. This can then be adjusted to match the subject private business profile.

Other methods which take components of both the income and market approach are the “Multiple of Discretionary Earnings” and “Gross Revenue Multiple” which consider the actual income of the business being appraised and apply a market-derived multiple to these earnings based on available public data.

Asset Approach

As a general rule, the asset approach is considered and primarily weighed when a business is operating at a loss or has shut down temporarily or permanently. The options available to the appraiser under this approach are as follows:

Adjusted Net Asset Value: Under this methodology, the appraiser will adjust the company's tangible assets based on an estimate of Fair Market Value, while taking into account existing liabilities.

Liquidation Value: If the business has permanently ceased operations, and a compulsion to sell the remaining assets is the only remaining option, the value of the assets is measured under an Orderly or Forced Liquidation premise.

Book Value: This method relies solely on the net book figures of the assets recorded on the company’s books, without adjusting to market or liquidation value. Given accounting depreciation methods are usually accelerated, this will likely lead to undervaluing the assets.

Excess Earnings: This method takes into account the historic earnings of the company and provides a broad way to measure intangible asset value as well as tangible, by estimating the goodwill of a business along with personal property, equipment, improvements buildings, and land. This is generally preferred for fully operational companies with a lot of tangible assets.

By gaining a better understanding of these valuation methods, you will be able to work together with your certified, experienced business appraiser, in a successful fashion, to properly appraise your company.

Tags: business appraisal, small business valuation services, business valuation methods, small business valuation methods, Business Valuation Methodologies

What to Prepare For if Your Business is Being Acquired

Posted by Business Valuation Specialists LLC on Dec 20, 2021 7:00:00 AM

Business Valuation Appraisal Acquisition Preparation

When your small business is targeted for acquisition, it can be both an exciting and stressful time. It is important to prepare for this scenario as you grow your company, so when the day arrives, you have the tools in place to facilitate the process. Here are a few tasks to consider updating now to prepare:

Organize Your Business Documents

The acquisition process is lengthy, but it will go smoother if your financials, taxes, and transactional records are in order. Both hard copies and electronic files need to be organized so a third party involved in the due diligence can easily access everything they need in support of the sale. Make sure all taxes, insurance, and benefits are up to date. Sort through all historic company documentation to ensure it is consistent with the preliminary data provided to the acquisition team. This will save weeks and potentially months of time and minimize any red flags that otherwise would be raised during this stage of the deal.

Obtain Pre-Acquisition Appraisals and Update Them With the Collaboration of the Parties

Before you dive deep into a potential sale, have appraisals completed on your business, equipment, and real estate. A valuation effort will be completed internally by the acquisition team based on the data you provide them, however, suggest an updated business and tangible asset appraisal be performed by a certified and accredited valuation firm. This will leave little to no doubt as to the current market value of your company and can be used for other purposes in the immediate future.

Find Trusted Partners

It is difficult to go through an acquisition by yourself, so make plans to identify trusted consultants who can assist you during the process. Business attorneys, appraisers, tax advisers, and investment bankers are some of the contacts you want to develop in advance of an acquisition. These partners can help you manage your expectations and take some of the burden off you while positioning your business for a successful sale.

Complete Your Own Due Diligence

While third parties can help you understand the market, you should consider doing your own research to better plan and understand the strengths and weaknesses of your company. Review recent transactions in your industry and identify trends. Try to determine the best type of company to acquire your business as a stand-alone operation or part of a larger firm.

Get Stakeholders and Employees on Board

While you may be ready to sell, not all company personnel and current investors will understand the decision. The process will run smoother if you communicate clearly to all parties affected by the transaction. Personnel and clients are part of the overall value of your business. By retaining these relationships going into the sale, you can avoid infighting that might sabotage the deal.

By taking these steps before an acquisition, you can properly position your company as the right fit for the acquisition firm, while navigating every step of the process with confidence and ease.

Tags: Business Appraiser, business valuations, acquisition, preparation

Using Public Company Data to Determine Private Business Value

Posted by Business Valuation Specialists LLC on Dec 6, 2021 7:00:00 AM

Business Valuation Public Company Value Private Company

When you are trying to determine the overall value of your business, a certified appraisal is a great place to start. If you are a business owner, and your company’s stock is not traded publicly, it is considered a privately held concern. There are a few distinct variances between private and public company valuation methodologies. Understanding the potential approaches the appraiser will take to value your private company while using data from public businesses, is important as you work with them to develop a realistic and supportable value.

When private businesses are appraised, there are a number of approaches that are considered. For the majority of ongoing enterprises, the income and market approaches are measured and weighed to ultimately determine the most accurate value for your company. When the market approach is utilized, the business may be compared to a similar public company, while making adjustments that look to match the public company as closely as possible. The income approach will review historic and current revenues and expenses, in an effort to reasonably discount cash flows over a future earnings period.

There are other, deeper approaches the appraiser will consider as well, within the market and income methodologies.

Under the market approach, there is both a “Guideline Public Company Method” and a “Guideline Company Transactions Method” used for private businesses.

The first option reviews financial data that is freely available from similar publicly traded businesses. It considers the actual price investors would pay for a minority interest in the public company as the basis for the valuation. The public businesses targeted for comparison are typically in the same industry and market as the private company, with a similar business model.

The second “transactions” method may be considered if a public company has recently been sold which closely fits the structure of the private company, within the same business sector. Financial data may not be available, however, details of the sales transaction can be reviewed and weighed in the appraisal effort. Under the income approach, the “Multiple of Discretionary Earnings Method” and “Gross Revenue Multiple Method” are the two most commonly used for private companies.

Within the first of these, if your business is simply too small to compare to a public entity under the market guideline methods, this alternate approach might be more applicable. It looks solely at financial statements and adjusted earnings by deducting discretionary expenses from the bottom line of the typical public company model to create a reasonable multiple of adjusted earnings, which is then applied to your private business’s adjusted earnings.

Under the second income method, the gross revenue of a typical public company in your market is considered to estimate a multiple, which is then applied to your private company's revenue, to determine value. This method doesn't consider profitability, which may be a factor that will affect the appraisal.

Engaging with a certified business appraiser will start the process of valuing your private company and all of the potential methodologies considered in the process. The results will assist you in the potential sale of your company, or offer support when considering refinancing, new investment, updating company practices, and adapting to new markets.

Tags: Business Appraiser, business valuation approaches, business appraisal services, private company valuation, public company

Has the Value of Your Company Materially Changed Since 2019?

Posted by Business Valuation Specialists LLC on Nov 22, 2021 7:00:00 AM

Business Valuation Change in Value Appraisal Appraiser

Whether you own a small business or a conglomerate, many markets and industries have been significantly affected by the pandemic and more currently, the supply chain shortage, resulting in delays of transactions for a multitude of products and services. If your business model has been greatly altered as a result of these unprecedented times, and you are struggling to adapt to the shifting marketplace, consider obtaining a current business valuation to assist in measuring these changes, and developing a game plan for the future.

A certified business appraisal will also provide you a distinct advantage if you are considering buying, selling, refinancing, or taking advantage of available investment opportunities. The ability to manage your business efficiently and successfully, as the playing field changes around you, is critical to the long-term success of your enterprise.

In today’s challenging economy, understanding the true value of your business will allow you to better recognize and capitalize on opportunities ahead of your competitors. It will also help prevent you from making costly mistakes. Regardless of the situation you’re presently involved in, a certified business appraisal will help enable you to make the best decisions on a day-to-day or long-term basis.

The appraiser will walk you through the process and provide insight as to the information needed to measure the overall value of your company with past, present, and future scenarios considered. As you communicate and collaborate through the process, the business valuation expert will determine the best approaches to consider and ultimately weigh, during the appraisal process. Making the most out of an otherwise negative situation, and potentially capitalizing on opportunities in these difficult times, is part of the formula of the successful, and adaptable business owner.

Tags: Business Valuation, Business Appraiser, business value, change in value

Determining the Value of Your Business's Intangible Assets

Posted by Business Valuation Specialists LLC on Nov 8, 2021 7:00:00 AM

Business Valuation Appraisal Intangible Assets

When a business valuation is conducted for your firm, its assets will be considered in the overall value. If your business appraiser determines that a strict asset approach is relevant to the overall analysis, they will look to understand the market value of tangible items such as cash, receivables, inventory, machinery & equipment, buildings, and land.

If your business is in an active and operational condition, the value of its intangible assets will also be considered. These can include domain names, patents, copyrights, licenses, customer lists, client relationships, non-compete agreements with prior employees, a trained workforce, guaranteed contracts, leaseholds, and general goodwill.

These intangible assets are generally more challenging to estimate value for, as they are not typically itemized on your balance sheet, and need to be reviewed separately to determine a reasonable approach to appraising. The business appraiser will want to review as much internal data as you can make available so they can consider these intangibles as part of the revenue that continues to drive the business. It’s reasonable to look to carve out a value for these intangible assets based on their particular impact on the overall value of the business. The appraiser can provide guidelines to assist in developing historical data and potential growth in the company as a way to measure this in a finite manner.

>As an example, certain contracts and existing client relationships can likely be attributed directly to consistent and tangible revenue the company has experienced over the years. A newly signed contract may open a pathway to future growth that can be measured based on the terms of the deal.

In summary, when completing a business appraisal under an asset approach, it is important to measure the value of all the assets in the company, both tangible and intangible, to gain a complete perspective of the overall value for your business. Working with your appraiser to develop reasonable measurements to value these assets, will result in a credible and reliable outcome.

Tags: Business Appraiser, Asset Approach, business valuation approaches, valuing a business, tangible assets, intangible assets