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.

Business Opportunities are Everywhere

By: BuyTradeBiz.com

It is easy not to see opportunity when you are surrounded by it.  Many of us have grown up in an environment that is opportunity rich.  Our environments may be so rich, in fact, that it may be difficult to see the “forest for the trees.”  In our day-to-day lives, being able to spot the business opportunities that exist all around us can be difficult.  The hustle of every day existence can make it difficult for many of us to envision changing our lives in a major or dramatic way. Yet, it is quite possible for us to do so, and one way is through finding a business for sale.  In this article, we will look at how owning your own business can actually change your life.

Some people feel as though all the good business opportunities are already taken; however, this just isn’t the case.  The world is constantly changing and evolving, and, as a result, that means new opportunities are constantly being generated.  Having the ability to spot these new opportunities is a skill that will serve you greatly and luckily can be developed over time.

Finding a business for sale is, of course, one of the easiest ways to investigate what business opportunities are out there.  There is no shortage of good, solid businesses for sale on the market, and with a little digging you can find one of your own!

Buy a Business and Invest in Your Future

There are many reasons that you should consider owning your own business.  First of all, those who own their own businesses are less susceptible to the ebbs and flows of the labor market.  While a downturn in the labor market may indeed impact your business, it is not the same as actually being part of the labor market.

For example, if the economy slows down, you can adjust your strategies and tactics in a range of different ways.  Perhaps you change how you market to your customers, perhaps you get more aggressive in your market or you even change your core business model or strategy if necessary.  By contrast, if you are in the labor market and your job is eliminated, downsized or exported overseas, you are left seeking employment elsewhere.  Buy a business for sale and you are, to an extent, insulated against these problems.

True with business ownership comes other risks.  However, when you invest in a business for sale, you have a much greater degree of control over your fate.  Being able to control your fate is a wonderful thing.  Don’t forget that if need be, you can always be the one looking to sell a business.  If you keep your business profitable, there is no reason that it will not eventually be attractive to someone else.  The fact that you can potentially make a significant profit down the road when you sell your business provides yet another incentive towards being an entrepreneur.

Making the decision to buy a business is clearly one of the biggest decisions that one can make.  Considering this fact, it is important that you do not rush into any decisions.  Instead take your time, do your research, consult with experts.  Follow your gut instincts and double check your facts and preconceived notions and ideas.  There is a great deal of opportunity in owning your own business, and with the right approach you will find that it can really pay off.

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