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.

Considerations for Buying or Selling a Restaurant

By: BuyTradeBiz.com

You might not realize it, but the independently owned restaurant is still alive and well.  While the dining landscape may seem to be dominated by a handful of fast food giants, there are still many independently owned restaurants that are thriving and serving millions of people every day.  In the restaurant business, one can make a good deal of money, as mark ups tend to be quite high.  If you are lucky enough to find a restaurant for sale that is well liked and well trafficked, you could be in for a real treat that has nothing to do with food!  Likewise, if you have a great restaurant for sale, you should have no problem finding a buyer if you have a thriving business.

Profitability

If you are considering any business for sale, it only makes sense to evaluate whether or not it is profitable.  If all you ever hear is that the business has “potential,” you probably want to head in the other direction if you are a buyer.  Potential is great, but when its coupled with a track record of established earnings!  There is nothing magical about the restaurant industry, and it’s important to keep this in mind when you see owners looking to sell a restaurant.  A restaurant needs to be profitable like any other business for sale.

If you are selling a restaurant, be prepared that you will be asked about the profitability of your business.  These types of questions are asked across the board when it comes to businesses for sale.  If your business isn’t currently making much money, you need to be prepared to sell it for a lower rate.

Long Term Potential

Seeing a restaurant for sale sign might be an exciting moment, but it is also important to step back and evaluate the long-term potential of any restaurants for sale that you come across.  As a buyer, you need to make certain that your clientele will not suddenly dry up and vanish due to circumstances beyond your control.  This can be tricky but if you ask the right questions and investigate the area in which the restaurant is located you will be giving yourself a real leg up. Don’t hesitate to ask questions that will inform you about a restaurant’s reputation as well.

If you are planning to sell a restaurant and your business has reputation issues, see if there is anything you can do in advance to repair these problems.  Also the cleanliness of your restaurant goes hand in hand with its reputation.  Make sure that you have past inspections and have the proper licenses.

Additional Advice for Buyers

When it comes to businesses for sale, if you get a bad vibe, be sure to listen to that instinct.  Often something will seem wrong or off, but you just can’t put your finger on what the problem is.  Don’t be afraid to simply walk away regardless of the time you may have spent investigating the business or restaurant in question.  Ultimately, you need to know that the business you are investing in is worth not just your money, but your time as well.  After all, your time is the most precious commodity of all.  The last thing you want is to invest it in a business that is unprofitable or makes you miserable.  If you are not enjoying your life, then how can you enjoy any money that you make?

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.

Should I Sell My Gas Station?

By: BuyTradeBiz.com

The decision to put up a business for sale is one that can sometimes involve weighing a good deal of pros and cons.  After all, whether you bought the business from another party or started it from the ground up, your business is important to you.  However there are times when the decision to put up your gas station for sale can become remarkably simple. For example, perhaps you have been offered a dream price or maybe you’ve simply had enough.  Other considerations could be that its time to retire, your business is slowly going under or you have another even better business opportunity lurking in the wings.  Regardless of why you decide to sell, the time may come when you have to do just that.

Do You Still Feel Motivated?

If you no longer feel motivated to work on a business, then it certainly may be time to sell.  Lots of people are looking for gas stations for sale and, as a result, you might just have an easy time making the sale. When people are thinking about businesses for sale, one of the top candidates that pop into the minds of many people is that of a gas station.  Gas stations are so ubiquitous in our society for they are the very heart and soul of modern transportation.  It is an understatement to state that gas stations are indispensable in modern life.

While gas stations play an important role to society, you may not feel as motivated to keep your gas station business going.  Thus, you may feel that its time to sell a gas station.  If your motivation isn’t there, you simply won’t be as focused, and this can potentially be very problematic if you are an owner-operator or the gas station makes up the bulk of your income.  Thus, stepping back and deciding whether or not you want to keep your gas station is key.

How Do You Feel About Long Term Prospects?

A big part of evaluating whether or not to put up your gas station for sale centers on what you believe your long-term prospects to be.  If you feel that you are in a location that is destined to only enjoy ever growing levels of traffic and you are not in a cash crunch, then keeping your gas station might be the right move.  On the flip side of the coin, if you feel that the long term prospects for the region in which your gas station is located are less than stellar, then maybe selling is your best move.  Analyzing the situation may take some work and maybe even some expert advice, but if you want to be fairly confident and resolute when you list your gas station in the businesses for sale section, then this is something you will need to contemplate.

Knowing What Comes Next

Before you decide its time to put that Business for Sale sign in the window, it’s important that you have some idea of your next step.  Will you be starting a new business or buying another business?  How much profit will you be walking away with?  What is your minimum price?  These are some of the critical questions that you should ask before taking the jump.  If you carefully analyze your intentions and your potential outcomes ahead of time, you will be in the best situation once your business is sold.

BuyTradeBiz.Com is the Internets 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.

With more than 400 million users and increasing everyday, Facebook.com is one of the most powerful social media platforms around.  Facebook advertising platform is very similar to Google Ad sense; it displays ads on the right side of the screen allowing users to find out more information regarding the company/product.  There are a few more advantages to advertising on FAcebook, such as:

1. Target: The ad can be targeted towards the audience by gender, education, relationship status, workplace, and keywords.
2. Engage:  If you are promoting a page of event, Facebook will add the “Become a fan” or “RSVP to this event” button on the ad, therefor the users don’t have to leave their current page to engage with you.
3. Budget: Ads are shown based on cost per click model or cost per thousand model (pay per 1,000 ad views).  Depending on your ad the CPM model might work better for you.

Social media is evolving everyday, why not take advantage of it when you can and list your business for sale?

Can You Get a Top Price for Your Business In a Down Economy?

You didn’t get to be the owner of a successful private company by following the crowd.  You instinctively found opportunities to prosper within every crisis you faced.  Now, you are considering selling your company to perhaps, spend more time on Cape Cod or restoring that ’55 T-Bird that’s been collecting dust in the back of the shop for years now.  But, with the economy in the shape it is, doubtless best to put any plans of selling on hold for awhile until things turn around. Right or wrong?

Good News
Our experience selling businesses more than 2,000 businesses over almost thirty years through the best and worst of times is that private companies’ valuation methods do not change during a recession. In fact, a down economy might be the best time to sell a good company!

Here are some of the reasons why:

• Savvy individual and corporate acquirers understand that the best way to grow is through acquisition of profitable companies that will help their core business prosper.  They realize they must take advantage of an opportunity when it’s available or risk losing it altogether.
• Fewer profitable companies are on the market in poor economic times primarily because business owners who, under normal conditions, would be selling their businesses are deferring a sale because conventional wisdom dictates that “you can’t get a good price in a down market.”
• Serious buyers are constantly in search of quality acquisition opportunities.  The number of Main Street and middle market business buyers increase as more and more people are laid off and/or outsourced.
• You can get tomorrow’s price today for your business if you choose a buyer who recognizes the opportunity your business represents and considers expectations of future profitability when assessing value.

In order to obtain an optimum price for a business, regardless of the economic condition, one must attract the type buyer who will recognize the opportunity the business represents.  In real estate, optimum value is determined by the entity that will recognize highest and best use of a property.  Business prices typically reflect an acquirer’s perception of future earnings under their ownership. Therefore, the optimum value of a business is determined by the buyer who recognizes the most opportunity the business represents.  A business can be considered worthless to one yet be worth millions to another.

How to Identify Your Ideal Acquirer

There is no substitute for real world experience when it comes to differentiating between buyer types and determining how various issues surrounding your business and industry will impact their perception of value.  Public companies call upon their Investment Banker to obtain the pre sale intelligence required to make informed decisions.  Private companies can call upon their Business Intermediary to obtain the same kind of information.  The first step is to engage a Business Intermediary (Broker) who is familiar with the marketplace for your size and type business.  This professional will employ a two step approach to the process i.e.:

Step One – Provide you with:

• An overview of marketplace dynamics, a description of the different buyers, how they think and how their thinking impacts the value of your company.
• A summary of what buyers can be predicted to pay for your business,
• A list of recommendations both long and short term to enhance and increase your company’s value – in other words, be sure that a satisfactory outcome is obtainable before you bind yourself to a contract to sell.

Step Two – Once satisfied that you can obtain your price, even in a down economy, you authorize marketing efforts to begin.

• Marketing and Due Diligence materials are created and assembled
• Advertising and other marketing strategies are implemented to attract your ideal candidate
• You will know everything of importance about your candidate before they know your company’s identity
• Your business is sold at your price, typically with three or less exposures

In Summary:

Business pricing methods remain unchanged even in a down economy; fewer profitable companies are on the market, the number of serious buyers in the marketplace increases in a down economy, savvy business owner’s know Only the Right Buyer will pay the Right Price and; you should not attempt to sell unless you are sure you can get your price no matter what the economy.

Author: Theodore P. Burbank, FIBBA, CBI

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