Business Valuation Blog | Understanding Buying / Selling a Company

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

What is EBITDA? How Does it Measure Your Company's Financial Health?

Posted by Business Valuation Specialists LLC on Jun 21, 2021 8:00:00 AM

Business Valuation Earnings Before Interest Taxes Depreciation Amortization

When you're trying to determine the financial condition of your business, there is a wide range of formulas and techniques available. One key measurement is calculating earnings before interest, taxes, depreciation, and amortization (EBITDA). What exactly is EBITDA? Here's an inside look at how this figure is calculated and utilized in measuring the financial status of a business:

A Breakdown of EBITDA

The components of EBITDA consist of:

  • Earnings: This refers to net profit, or the total revenue of your company less expenses and overhead.
  • Before: The earnings before additional deductions are considered.
  • Interest: Interest represents the cost of any loans and similar financial instruments your business has on the books.
  • Taxes: This typically refers to income taxes only.
  • Depreciation: Depreciation represents how much capitalized value you deduct for your fixed assets over a particular time period. It is typically determined using acceptable accounting standards such as the Modified Accelerated Cost Recovery System (MACRS) or through an updated valuation of your company’s tangible property (equipment and real estate).
  • Amortization: Amortization is the reduction of business debt, such as loans and alternate types of financing over a given period.

As a general rule, EBITDA is a measurement to determine a company's profitability, or cash flow, however, it may not fully represent cash earnings. EBITDA considers a wide range of factors that come into play with business finances. It is not a universally accepted accounting measurement, and, therefore, has some flexibility with how it is calculated and measured.

From an application perspective, it is used by banks and financial services companies to estimate debt servicing levels. It is also commonly used to compare similar businesses within an industry or market and as a tool to preliminarily estimate a company’s current value using multiples of EBITDA.

A similar calculation that provides the same basic information is the earnings before income and taxes, or EBIT. The difference with this measurement is the exclusion of depreciation and amortization. When these variables are removed from the calculation, it represents the company's operating profit vs. overall cash flow.

With an understanding of how EBITDA is measured and utilized, you can gain a better understanding of how your company is viewed in the industry and its overall financial health. It is always optimal to have a more detailed independent measurement of value completed for your company, especially if you plan to sell, expand or refinance debt. A certified business appraisal will provide you with the overall value of your company, as well as information on the market, industry, competition, and the strengths and weaknesses of your company.

Tags: business valuations, appraisal, business valuation appraiser, EBIDTA, Financial Health

How Valuing a Small Business Provides Great Insight

Posted by Business Valuation Specialists LLC on Jan 18, 2021 8:00:00 AM

Valuing Business Insight Certified Appraisal

It's no secret that small businesses are more flexible than larger companies, able to change production, focus, and market more quickly than their larger counterparts. With this change, though, as a small business owner, how do you ensure you're not exposing your enterprise to excessive risk that could cost you valuable revenue and profits?

Valuing a small business enables you to see into the nuts and bolts of where your company is strong and where it needs improvement, allowing you to manage risk more effectively to take advantage of opportunities as they become available.

Maximizing Flexibility

There's no doubt that the ability to nimbly change direction is one of the greatest advantages of small businesses over larger companies. However, changing direction requires that you know the condition of your business before commencing change. Will an evolution take advantage of market conditions or will a different business environment create growth for your company? Or conversely risk slowing it to a stop, even possibly putting it and everything you've worked for at risk?

To take maximum advantage of changes in your market, you need to know exactly where your business stands to determine where and when to make changes. One of the easiest ways to achieve this goal is by engaging a certified business appraiser to provide an updated valuation of your company.

Knowing Strengths and Weaknesses

How does the valuation of a company help you make it more flexible? All businesses, markets, and owners have different strengths and weaknesses. Knowing where your company lies through a small business valuation provides you with the information on whether an opportunity is a good one that plays to your strengths, or otherwise leaves you open to significant risk with the potential loss of market share. Business valuations are one of the best ways to determine where these strengths and weaknesses lay, whether it's in undervalued equipment, overvalued assets, or poor cash flow issues.

Reducing Risk

Valuing a small business allows you to know whether taking a particular approach to the market is a good idea or not. Business appraisals may help you determine whether your regional location has changed in market share, or what your expected business income may end up being when you've had inconsistent revenues and expenses in the past. You may be able to determine the change in your business is based on a recent boom in the market and if that boom is a short or long-term trend.

If you're considering a merger or partial sell-off to expand or reduce your business, will the new company reflect your strengths or pull it down by exposing weaknesses? By knowing where your company stands within the structure of a business valuation, you can make decisions that will leave you stronger instead of opening you up to needless risks.

By having your business valued by a certified appraiser, you can increase the chances of making good business decisions that will keep your company in the black and growing. Taking the time to have an appraisal performed gives you another tool and the added insight to help ensure you will be successful. If you need assistance finding a qualified business appraiser, please contact us today. At Business Valuation Specialists, our highly-qualified valuation specialists are waiting to help you succeed.

Tags: Business Valuation, business appraisal, valuing a small business, certified appraisal, business valuation appraiser

Why should you insist on working with a certified business valuation appraiser?

Posted by Business Valuation Specialists LLC on Apr 4, 2018 2:29:00 PM

Though there are many reasons why you should have your business valued, working with the right business valuation appraiser is vital to making sure you get accurate results. One of the most important factors to investigate before you hire is whether the appraiser is certified. But why is the certification process important and how can it impact what you get out of your appraisal? Here's a quick look at why you should insist on only working with a certified business valuation specialist.

Why should you insist on working with a certified business valuation appraiser?

Let's look at a couple situations. A business needs to determine the value of their company and has a few options before them. In the first, the business gets an idea of what the company will be worth on the open market based on the determination of a real estate agent. It costs the business virtually nothing beyond a bit of time to get the appraisal completed. However, the final valuation may be based too strongly on the realtor's goals. But how do those goals impact the final value?

The realtor may be short of funds due to slow sales, and therefore suggest a price that is lower than may be reasonable due to needing a fast sale. Perhaps they're flush with cash and want to wait for the perfect buyer for a high commission down the road, regardless of how quickly you want to sell the business. They may not be familiar with the exact nature of your business, so they make a guess based on what little they do know without carefully considering the impact it may have on your bottom line.

Now imagine that the business hires a certified business appraiser. The certification process means that the appraiser hired can look at the exact situation for which the appraisal is needed. If a company needs to determine the value of a business for reasons other than a sale, the realtor's approach can be completely inappropriate. What if a business owner needs to make improvements? Many companies use business appraisals as a starting point to improve profitability and efficiency throughout its operations. Perhaps the business will be changing hands to the next generation and the current owner needs to know what their legacy is worth so they can decide how much of that value is a gift and how much will be needed for their retirement.

What if there's a divorce or lawsuit at hand that requires the business value to be disclosed as part of the proceedings? In many legal situations, the appraiser is required to use a particular methodology to generate the business' value for the court. A simple appraisal or guess at a value by a realtor won't hold up to that level of scrutiny.

It can be really tempting to try to save a few bucks by simply going with someone who doesn't have a certification, it's simply not worth the risk to your company and the problems associated with trying to work with a bad appraisal. By insisting on only working with a certified business valuation appraiser, you can ensure that your business' interests are protected in any number of situations. Fortunately, finding a certified appraiser is a fairly simple process, so make sure when you start looking at appraisers for your business needs.

Tags: business valuation appraiser