Valuation Of Emerging Technology Businesses

By: BuyTradeBiz.Com

Typically traditional business valuations are based on income, assets, cost approach and historical performance. Emerging technology companies present a significant valuation challenge, since they typically have limited revenues, few fixed assets, and a history of losses – and a short history at that.

There are several unique aspects to valuing a technology company. The factors typically present in a traditional valuation are either not present or provide very little insight in a technology company valuation.  Typical valuation methodology looks to assets and/or income for value and involves income, assets and cost approaches. Operating businesses are usually valued based on an expectation developed from their historical performance. On the contrary, technology companies many times have limited revenues, no history to speak of, and a track record of financial losses.

Often the technology company will represent the first of its kind of business. Therefore, it is difficult to find a peer group or competitors to benchmark performance. So, investors in technology companies usually look toward the future with an expectation of explosive growth.  Here are some other factors that impact the process of valuing a technology company vs. a traditional business opportunities:

Lack of Fixed Assets and Inventory – Technology companies do not invest significant dollars into land, buildings, or other fixed assets and derive most of their value from intellectual property. Since the products or services produced by the company are electronic bits & bytes, there is no inventory to speak of.

Projections are Key – The valuation of an emerging technology company is based on the projected future stream of income from its intellectual property. Projections include assumptions regarding demand for the product or service, revenue growth, competition, alternative technologies, the economy and many other factors. However, such assumptions, if based on market research, known facts and sound logic can be a basis for value.

Cost Of Capital – Another difficulty in the valuation of technology companies is determining the cost of capital. Many technology companies are dependent upon equity financing causing the cost of capital to approximate the cost of equity. Some technology companies issue hybrid securities, such as convertible bonds. Technology companies may have bank debt, making it hard to rate. In general, estimating the cost of capital from historical data is more difficult with technology companies that have short histories.

Management Strength – Investors often have their own methodologies for valuing technology companies. Some may evaluate certain factors and assign values to them. While a good idea may have value, without good management it may not be successful. Strong management may be worth more than any other characteristic. Industry contacts and relationships are important factors. Demand and an analysis of the marketplace must be evaluated. Finally, the feasibility of the product itself must be considered.

Intellectual Property – Most of the use of capital in a technology company goes to building up the company’s intellectual property.  So the appraiser has to pay close attention to the built up intellectual property in order to assign value to it.  Unless there is a proven track record of revenue, the appraiser has to research the market and evaluate the potential for the product before assigning value.

Given these challenges, it is clear that the valuation of technology businesses for sale should be performed by an appraiser familiar with current trends, data sources, market transactions and market participants.

BuyTradeBiz.Com is the Internet’s newest business for sale and franchises for sale listing website.  This is the site if you are looking to sell a business or buy a business or buy a franchise.

Owning a store of any kind can be one of the best business opportunities that you can find.  With that stated, however, when it comes time to look at stores for sale, you will discover two facts.  The first is that there are lots of people looking to sell a business.  You will, of course, find many stores for sale.   However, this is really only the beginning of the process.  The second fact is that will quickly become quite obvious is that while there are certainly lots of businesses for sale, they will not all be the perfect fit for you.

Personal Interest is Key

It is important that you factor in your own personal interests when you are thinking about a business for sale.  There are many reasons for this fact.  The more you understand an industry, the more likely you are to be successful with your endeavors.  Of course, this is not to state that you can’t excel with a store in an industry that you don’t understand, but it is worth proceeding with extra caution when you are venturing into unknown territory.

Know the Lay of the Land

If you don’t know a great deal about an industry, but you still find stores for sale that are intriguing deals you can still proceed.  The trick is to make sure you find an experienced manager or consultant to work with, as you will surely need an experienced guide you can “show you the ropes.”

Are You Willing to “Put in the Hours?”

While you can clearly operate a business that might be outside your comfort zone and base of knowledge, there is also something to be said for following your own interest.  If you are interested in a given area and you see that it has business opportunities, then you likely will feel more like working the long hours that are typically involved in running or owning a business.  This is no small factor.  After all, owning and especially running a business can be a tremendous amount of work.  So when you are considering a given business for sale opportunity, stop and ponder whether or not you are willing to “put in the hours” necessary to make your new business a success.

Pause to Reflect on Your Choices

Many people wonder if they should have a natural interest in whatever type of store they ultimately purchase.  This is a smart question to ask, as you look through stores for sale.  In other words, when you are looking at businesses for sale, it makes sense to ask yourself, “Can I see myself owning or running this business?”  If you have serious doubts about your ability or your interest to own or operate a given business, then you might want to keep looking and find someone looking to sell a business that you are more comfortable with.

Clearly, owning a business is a major responsibility, and whether or not you have an interest in the store under consideration is obviously a major consideration.  No decision takes place in an emotional vacuum.  That means you have to consider, at least in some fashion, your own level of interest and understanding in a given store or business opportunity.

BuyTradeBiz.Com is the Internet’s newest business for sale and franchises for sale listing website.  This is the site if you are looking to sell a business, buy a business or buy a franchise

Websites for Sale, What Are the Key Factors

By: BuyTradeBiz.com

The Internet and Digital Era have forever changed the way that the world does business.  Yet, that does not mean that all the “old rules” have been tossed out the window never to return.  In fact, the same basic rules that have always applied to the world of business still apply today to the world of making money from a website.  While some websites are wildly popular and bring in a great deal of money, others bring in very little income.  In this article, we will reflect on some of the key factors involved buying a website.

Money, Money, Money-Yes It’s All About Money

First and foremost, when looking at web-based businesses for sale, it is important to consider whether or not the websites for sale actually either turn a profit or have a clear path towards profitability.  There are billions of websites in the world, but this certainly doesn’t mean that they make billions of dollars, at least not each of them.  When you set out to buy a business of any kind, it’s important that you understand the revenue model and the flow of revenue.

The Flow of Revenue, Old Rules Still Apply

If the parties who are looking to sell a business can’t clearly show you where and how their website makes money, you should be very nervous.  After all, there is nothing magical about a website.  The old dynamics of “making a buck” still apply.  Keep this fact firmly fixed in your mind when you are considering a web based business for sale.

Potential for Growth is Always Key

One of the great aspects of the Internet is its potential to grow.  The simple fact is that the growth of the Web has continued to outstrip even the most optimistic of impressions.  However, this does not automatically mean that the websites for sale that you are considering are a “slam dunk” when it comes to being profitable or highly profitable.

Long Term Profitability and Stability

Determining the profitability of any business for sale is a complex equation that is dependent and reliant on a variety of factors, which are both subtle and complex.  In other words, when someone is looking to sell a business, Internet based or otherwise, it is your responsibility as the interested party to not just understand where the revenue is coming from, but also whether or not long term growth and stability are part of the equation.

Looking Good on Paper

Lots of businesses for sale may look great on paper, but that doesn’t mean that you should buy a business based on its current level of success.  For example, a big competitor may have just entered the market, and that could spell disaster for all websites for sale in this particular category.  If this is the case, of course, it is no wonder that people are looking to sell a business. In this type of situation, you will likely also find that related websites for sale are plentiful too.

The bottom line is that all sorts of businesses may look good on paper, but that doesn’t mean they are worth buying.  The factors involving in buying an Internet business are numerous and complex, and this fact should not be forgotten.

BuyTradeBiz.Com is the Internet’s newest business for sale and franchises for sale listing website.  This is the site if you are looking to sell a business, buy a business or buy a franchise

Few business decisions are easy ones.  In fact, the larger they are and the more important they are, the more difficult decisions can be.  For example, the choice to buy a gas station is just such a decision.  More than likely, you have seen gas stations for sale from time to time.  This should come as no real shock.  After all, the number of gas stations in the world is truly staggering, and this makes sense considering the car-obsessed nature of our culture.  Plus, there is the wide scale acceptance of the concept of suburbia.  As a result, people spend a great deal of time in their cars.  Let’s be honest, on average, those cars get dreadful gas mileage and that adds up to a real business opportunity for those seeking to buy a gas station.

However the issue of whether or not you should buy a gas station is a bit more complex than it might initially seem.  In this article, we will explore some of the ups and downs that go along with grabbing that “Gas Station for Sale” sign and putting your name on the dotted line.  Gas stations for sale can be quite lucrative, but is this truly the right business for you?

Are You Comfortable Turning Over the Reigns to Someone Else?

When you see a business for sale, it is important to question whether or not that business is a good fit for you.  Can you envision yourself owning and perhaps also operating that particular business?  Many who own gas stations actually turn over that operation to other employees instead of operating it themselves.  If this is something that you are comfortable with doing, then a gas station might be one of the businesses for sale that you will want to consider.  However, if this idea makes you uncomfortable, then you might want to gear your search elsewhere.

The practicalities of who will operate your company are more relevant with a gas station than many other businesses.  If, for example, you buy a store that sell picture frames and does custom frames, you don’t have to necessarily stay open long hours.  However, this is typically not the case with gas stations.  Instead gas stations are usually open long hours and sometimes even 24 hours a day.  That means that an owner-operator is not likely to be present most of the time.  This is an important concern and one that any prospective owner should consider before buying a gas station for sale.

The Need for Gas is a Big Plus

Even if fuel efficiency goes up, it is also very likely that the price of gasoline will also rise as well.  The likelihood of this occurring is only amplified by the ever-growing need for gasoline, thanks in part to the industrialization of nations like China and India.

Thus, when you buy a gas station, you are likely investing in an aspect of the transportation industry that will be healthy for years, if not decades, to come.  There are alternative technologies and approaches on the horizon, but it will likely be quite some time before we see them.  These factors definitely make gas stations attractive in the array of businesses for sale.  Further, it is also quite possible that the existing infrastructure of gas stations will in some fashion be incorporated into any major “switch over” if one does actually occur.

BuyTradeBiz.Com is the Internet’s newest business for sale and franchises for sale listing website.  This is the site if you are looking to sell a business, buy a business or buy a franchise.

No one we know of has the crystal ball to tell us precisely when the economy is going to bounce back for business owners and consumers. Times like these lead many people to take matters into their own hands, and the good news is that there are business opportunities out there and a consumer base to go with it.

 If you want to hit the ground fast and hard you might want to go in the direction of buying an established business, one with a proven track record of course. Less risk is typically involved in buying a business that already exists. Reasons for this are: a profit-loss sheet is already active, live and present and it should clearly show positive cash flow and profits; customers and prospects exist and perceptions are in place; trained employees are familiar with day-to-day procedures and likely ready to help. If working, trusted employees and a working system are already in place you are good to go. There certainly may be some initial tweaks and changes in that you have your own way of doing things, are familiar with the concept and can bring new ideas, and may want to add a right-hand person(s) that you have worked with in the past.

 Different types of business models carry different commitment levels. We will overview two— websites for sale, restaurants for sale—going from less commitment to more commitment:

 Buying a website business can be rewarding if you are in the right market for you, your passion, your background in management and understanding of technology and distribution models. Almost any business, either selling a product or service or combination, can go online. But here we are talking about an established or premium website (both with vastly different cost and time commitments). If you are interested in primarily being the principal/owner of the business who is more savvy with financials and marketing, then you will need to find the technology expertise and hire that person on your team right away. When you’re ready to buy the web business, you need to communicate with the seller and get the business plan for the site, including how they attain leads, customer traffic numbers, partnering opportunities, advertising models, proof of income/revenues (monthly/yearly); ask and get answers to questions that are not in the plan. 

 If you are buying a restaurant, be sure you are ready to commit big to the love of food, people and service on all fronts, from back-of-the-house operations to front-of-the-house cosmetics and ambience. This can be a fun family commitment if other familial partners are interested, qualified and involved. Business valuation, again, and its potential down the road, is the first step to saying “yes”. In the restaurant space, you have no shortage of choices, including independents, fine dining, family/casual, quick-service, bakery/cafés, simple hot dog stands and pizza places, among others. You can also collaborate to create a website and printed catalog that offers your most famous restaurant items and merchandise that can safely be shipped to your growing customer base.

What a difference has the last decade in the way business is conducted around the world.  I am referring as the title suggests to how ubiquitous the internet has become and how central it has become to our existence.  Certainly, every teenage and even pre-teens learn ways to use the internet from Facebook to Twitter to Xbox to Ipod.

Just as in personal living the internet has contributed to a virtually unlimited ways to monitor, manage, and handle your business affairs.  Not just in operating your business, but when it comes to selling your business the internet offers countless ways to streamline and guide your process to more efficient way to prepare and even consummate the transaction.

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