Business Valuation Blog | Understanding Buying / Selling a Company

As a small business owner, I receive dozens of email “come-ons” every month advising me of wonderful new marketing, accounting, hiring practice methodologies, or related services that are supposed to increase my company’s effectiveness and efficiencies, leading to a healthier bottom line.

Personally, I have never followed up with any of these places, however, that doesn’t mean some may provide a useful service for my company. I just happen to be an old-school manager who has people I trust handling these kinds of things for me internally.

As a business owner, you should do what works best for you and your business. Have you been mired in the same processes for years without thinking of new ways to improve your business model? Are you a new start-up, ready to utilize the latest technologies, products, and services available to enter the market running at top speed?

In either case and for most business owners who are somewhere in between these two scenarios, you should keep an open mind about process improvements while continuing to rely on your own experience and expertise, as well as those of your coworkers. If you don’t have certain areas well covered at the moment, such as social media marketing, website development, or accounting software, it may be a good idea to research and engage reliable third-party companies who provide these services or look to hire those with the skill sets required to handle these key sectors of your business.

Consider if your goal is a long-term permanent improvement to your company’s capabilities or a shorter-term fix that can be solved with the help of an outside consultant. Depending on the industry you operate in, products such as accounting, valuation, and inventory management software, might be useful to consider acquiring. Other areas that are critical include marketing, website design, and search engine optimization.

Capitalizing on your past success and old-school work ethic, while staying current with the latest developments and capabilities in the business marketplace, will provide the best opportunity to be successful as you move forward with your small business. Take the time to review the strengths and weaknesses of the key components of your company’s current profile, and look to create a plan that will put you in the best position to succeed today and in the future.

From a personal perspective, we all have stages in our life where we strive to become the best version of ourselves, by improving our overall lifestyle in areas such as health, career, and relationships. Small business owners should take a similar look at their company and ask the same questions. Is my operation the best version of itself or are there ways to significantly improve it in the coming years?

You know your business better than anyone, and like your own life, you can dig deep to break down the areas that can be updated, enhanced, and made more efficient with some introspection, that can be converted into new processes that ultimately increase revenue and net profits.

Some examples to consider:

Overhead Costs

Whether it’s a fixed or variable expense, what areas of your monthly overhead costs can be better controlled without sacrificing quality and efficiencies? Possibly cutting back on expensive trade shows or business meetings where travel costs are high, especially in today’s market. Review everything, from current subscriptions to the employee health care plan for ways in which you might be able to save money while keeping their benefits at the same levels.

Capital Resources

Are their less costly financing options available in the market to restructure your current debt? Would a fresh infusion of working capital allow you to invest in new growth opportunities?

Updating Your Fixed Assets & Maintenance Programs

Is your plant & equipment still functioning at the same levels as when they were originally acquired? Are you spending too much on maintenance as a result of poor operating efficiencies?

Employee Performance Levels

Are you getting the same commitment and output from your staff since the days when they were first hired? Is there room to consider adding personnel in areas that would have a direct payoff to increased revenue or cost savings? Would additional incentives lead to more productivity and increased revenue?

Market Expansion

Are there unexplored markets that complement your key business focus that could lead to additional clients and services? Are you happy with the current market share for the sectors you are entrenched in every day?

These are just a few of the areas to consider when looking to create a new and improved version of your business. Take a deep dive with the knowledge and experience you’ve developed over the years to make improvements and continue to have success.

If you're considering getting a small business valuation, you're not alone. The primary reason small businesses are appraised typically has to do with selling the company or another type of change in ownership, such as passing it to the next generation. But if that's all you use a business valuation for, you're missing out on some serious benefits. Here's a quick look at the many benefits your company can gain outside of the negotiating room.

How can your company benefit from a small business valuation?

It's fairly common for a company to have a business valuation performed when a change in ownership is about to occur. This helps the departing owner know that they're getting a fair value for the business while the incoming owner knows that they're not paying too much for their new business. But the amount of information that is explored during the valuation process makes it an excellent tool to help you gauge whether your company is on the right track and performing up to its potential. How?

The valuation process starts by looking at a company's finances. The appraiser will look at potential transactions that will need to be recorded to normalize income and expenses to reflect the reality of the business, rather than rare high sales and significant expenses that skew your company's financial picture. It also looks at where your company's finances stand overall, giving you a better idea of whether you have a normal number of slow or bad debts from customers or if you need to crack down harder to get paid on time.

Next, it looks at your company's operations.  Is your business a leader in innovation and development in your industry? Is it running efficiently, or are there areas where improvements could be made to optimize your profitability and lower your overhead? The appraiser deals with companies like yours every day, so they can often provide strong, valuable insights into where your operation could be improved to optimize your productivity and profitability.

What about your company's place in the market? That's the next area that is typically explored. Does it have a strong reputation as a thought leader in the industry? Is it unique in particular areas that add value to the products and services you offer your clients? If you do have areas that are similar to competitors, those will be appraised as well as the areas where your company is truly unique.

Then there's the market itself. Is it currently growing, stagnating or shrinking? It's easy to get caught up in what your company has been doing in the market, but it's also important to know where it's going in the future. When the appraiser looks at your industry, they'll take into consideration any professional projections about future growth in the industry.

A small business valuation is a valuable tool that can be used to drastically improve your company's operation, performance and bottom line. However, if you aren't using a certified business valuation specialist for the process, you may be getting the wrong information. The certification process helps educate appraisers as to the proper approaches and methodologies to be used in a wide range of circumstances. Ensure that the money that you're investing in a business valuation is being well spent by using a certified business appraiser.

Whether your restaurant isn't doing as well as it used to or if you just want to take it in a new direction and don't know what will work, one way to gain those insights is by having a business appraisal performed. But what kind of information can you discover in the valuation of a company? What's the best way to have a company valuation performed on your restaurant? In this post, we'll discuss the ins and outs of business valuations as they pertain to the eatery industry and how you can use the information you gain to your business' benefit.

Valuing a Restaurant to Determine Your Direction

It could be that your business just isn't doing as well and you don't know why. Maybe you're considering changing to a different cuisine or theme and aren't certain exactly which concept would do best in your area. Perhaps you're getting ready to sell and aren't sure how to market your business' goodwill and reputation in the community. Whatever your situation is, getting a business appraisal is a great way to get a professional opinion about what you can expect in your restaurant.

A business appraisal specialist is trained to look at a variety of aspects in your business. If you've been losing business, is it because of competition or because your business has lost it's newness? A restaurant appraiser knows how to look at your financials to figure out which issue is causing the drain on your business financials. Would a change in theme or cuisine help boost sales or chase away your regular clientele? Instead of simply trying something and finding out later how badly it can impact your business, a business valuation specialist can help you think about specifics ahead of time. 

When it's time to sell your business, what is it really worth to a buyer? If the locals are coming in because it's just the convenient place to go, a buyer may be very interested in purchasing your establishment. But if it's because you've spent years developing the perfect cuisine for the area and a strong reputation in the community, potential buyers may need the reassurance that you'll help with the transition to new ownership. Otherwise they may have concerns about whether the business will remain solvent.

By getting a business appraisal on your restaurant, you'll have access to the best possible insights into what will and won't work to get your business back in shape. If you're not currently working with a certified appraisal specialist for your business appraisals, you could be missing out on the quality insights such an appraisal can bring to your business