How to Value a Business – The Free Business Valuation Calculator

Every business owner should have a good idea of what their business is currently worth even if they don’t intend on selling the business soon or at all. But you may also need to know what a business is worth in the following non-exhaustive list of circumstances. How many reasons do you have to find out what a business is worth?

Buying a business or division externally or internally
Selling a business or division externally or internally
Shareholder/partner agreements and buy/sells
Estate and superannuation planning
Family law – separation and prenuptial
Business insurance policy structuring
Personal insurance policy structuring
Actual death or disability of the owner/(s)
Litigation as plaintiff or defendant
The problem is that business valuations are a complex mixture of science and art that are further confused by ‘listing prices’ displayed by business brokers and their often flawed ‘rule of thumb’ methods that make no commercial sense. The steps to value a business are fairly straightforward but need to be followed diligently.The valuation methodThe transfer price of any business (or any asset for that matter) will almost always come down to the agreed price between a knowledgeable and willing but not anxious seller and a knowledgeable and willing but not anxious buyer. The purpose of a valuation therefore is to indicate to the seller and/or the buyer what price would represent a favourable financial outcome to them based on their required rates of return. The purest method of valuation is the discounted cashflow (or net present value) approach however this method requires precise knowledge of all cash inflows and outflows between now and infinity for the business. Whilst this method is great for some financial assets with guaranteed cashflows it is impossible to apply to a business with variable cashflows.The next best alternative used by most business valuers is a modification of the above method called the capitalisation of future maintainable earnings method. This method requires the valuer to forecast the most likely annual earnings figure (earnings before interest and tax) that will then be used as an annual recurring amount in the calculation. The valuer then applies a capitalisation rate to those earnings based on a required rate of return to give the business a value.Future maintainable earnings (profits)The earnings will usually be calculated based on the past performance of the business as well taking into account estimated projections. The net profit from the financial statements is adjusted to take into account various factors that are artificial or non-commercial amounts in the financial statements.The adjusted earnings before interest and taxes (EBIT) for each historical and projected year are then weighted based on some assumptions to formulate a weighted average EBIT or future maintainable earnings, which is considered to be the likely annually recurring earnings amount going forward based on the methods and assumptions used.Capitalisation rateThe capitalisation rate is inversely proportional to the required rate of return on the investment in the business. The higher the required rate of return, the lower the capitalisation rate and hence the lower the business value. Conversely, if there was no risk investing in a business the required rate of return may be as low as 5% and the business would be valued at 20 times the future maintainable earnings. This is almost never the case though as there are many inherent risks associated with running businesses. It is more likely that the required rate of return would be between 15% and 100% with corresponding capitalisation rates between 7 and 1 times respectively. The more risk, the higher return an investor would need compared to the investment outlay to make the investment.As the future maintainable earnings has already been calculated the only way to change the value of the business is to change the required rate of return. The higher the required rate of return, the less that the business is valued for the same level of future maintainable earnings.In the free business valuation calculator that I created on my website there are only 7 factors that influence the required rate of return. Bear in mind this is an oversimplified example as in practice the factors could total over 100. The responses to these factors have a significant impact on the indicative value of the business and are all related to business risks.Assumptions relied uponValuing a business is a complex science that requires an enormous amount of information gathering, due diligence and industry knowledge to give an accurate opinion of value. Due to the limited scope of any basic business valuation calculator the following assumptions or similar are usually made. These assumptions may or may not be accurate and will depend on the specifics of each business.

The information provided by the business is materially correct;
The past is a good indicator of future performance of the business;
The economic, industry and geographic factors are stable;
Key customers, suppliers and employees are supportive of the transaction;
All related party transactions are at fair value except for those specifically identified in the adjustments;
All inventory, plant, equipment, fittings and fixtures necessary for the operation of the business are included;
All depreciation amounts are book entries only and no significant upgrades of assets are required in the near future; and
All necessary intangibles and regulatory permits are transferable.
How to calculate goodwillGoodwill is simply the difference between the value of the business and the values of the identifiable net tangible assets (excluding bank loans and other loans). Should the indicative value be greater than the net tangible assets you have that much goodwill but alternatively, should the indicative value be less than the net tangible assets of the business, then the business would have negative goodwill and the assets would hold the only salable value.

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“Funding Your Own Business” – 7 Keys in Securing Funds to Start a Business (C-A-M-P-A-R-I)

In today’s difficult economic time, a lot of potentially successful business ideas by aspiring entrepreneurs are either cancelled, put to hold or worst, never made possible not because they did not want to but because they never had a chance to secure funds to start their business. There are various ways for you to secure the necessary capital that your business you just have to think out of the box, prepare and do a lot of research if you are really determined to turn your business idea into reality.While there are many sources of money for a small business, some are more accessible than others. Below is a list of 10 common sources of money:1. Personal Savings
2. Release Equity in Your Home
3. Government Initiatives
4. Buying on Credit
5. Leasing
6. Friends, Relatives and Business Associates
7. Banks
8. Other Commercial Lenders
9. Venture Capitalists
10. The Seller of an Existing BusinessWhen you think you are ready to start your business, the key is to “keep an eye on your pennies’. What that means is before you get all hyped and spend huge sum of your hard earned money, understand that you will need time to learn if your business is viable or not as it can be a mistake to pour in too much money at the beginning. It is a fact that a number of small businesses have failed, because they raised and spent a pile of money for an untested business. This could be an entrepreneur’s nightmare especially if you are hooked up on borrowed funds. While engaging in business involves risks, there are ways you can minimize these risks by being wise. Even though some businesses require a great deal of cash, there are still a lot of ventures that do not. It would be better to consider about starting your business small and cheaply as possible. Think of it this way, that if your concept works, more funds will be available for you and if not, you can move on and take advantage of the lessons you’ve learned and you won’t be burdened with a ton of debts.Also, a good way to plan for your business is to make an accurate business plan; a well-made business plan will be your prediction tool and will project your business from start up to even 3 to 5 years from now. A professionally made plan with clearly projected income and cash flow statements with the needed financial data’s such as furniture, fixtures, equipments, utilities, salary expenses, legal and professional fees, licenses and permits, taxes, rents, advertising, maintenance and repairs, accounting and all other expenses included could help convince and persuade investors, lenders, or any interested people that you have taken into consideration every detail of the costs of the business. Overall, the plan gives you a sense of security that you have the plan in your hands, you just have to execute the plan to make the business possibleWhen you already you have your plan, you now have to understand the various factors or keys for you to be able to acquire and secure funds not only to start but also the growth of your business. To make sure that you will be able to turn your business idea into reality, here are the 7 keys to Funding Your Own Business:Character – Can you be investible or are you worth the investment? Do you give the impression you will make your plans a reality?. You have to make sure that you took everything into consideration, you have everything planned out and you will be reliable enough.Ability – You may have the plan but not the money. But another factor that investors will look at is if you and your people have the right skills to make this plan possible. Are you experienced enough or do you have the potential to do what is stated in the plan?Means – What are the business’s assets what and your own personal assets? You must particularly specify what assets are owned by the business as they can be used as collateral for your loans.Purpose – You then have to specify what is the purpose of the loan? Is it for a sensible cash-generating plan? Few lenders will lend money to pay debts or to give yourself a nice pay rise.Amount – How much will you need? Your business plan will show you a projected amount so that you will be able to identify the right amount of money needed. What funds will you put in to reduce the lender’s risk? Explain the business carefully, it is important to explain the risks, the threats and how you will be able to manage and reduce the risks for the businessRepayment – Prove you will be able to repay the money with a realistic cash flow forecast. Such as how much you will pay, either monthly, by quarter, semi-annually or annually. Identifying and calculating the costs or different payment methods will help you choose the right repayment method and also ensure great income for you & the business.Insurance – Investors and lenders are wary of under-insured businesses. An uninsured loss could destroy you, your credibility and your ability to avail of future loans after all.Understanding these factors and taking them well into consideration by preparing will give you a better chance at being able to secure funds not only for the start but for the future of your business. There are various ways to secure funds but always remember that it is advisable to start small from your personal savings, prove the model and then seek JV partnerships for growth and expansion. In business, an entrepreneur takes risks but a successful entrepreneur invests and risks wisely.

Save Time and Money With Construction Staffing Services

There are 5 reasons temporary construction staffing services can help you get your projects done on time while helping you boost your bottom line at the same time!
You save money when you pay for the tradesmen you need, not the tradesmen you don’t!
Using staffing services will boost your labor productivity and therefore increase your profit.
You reduce administrative costs.
You don’t have to worry about recruiting and hiring management.
There is always a 100% satisfaction guarantee with construction staffing services from a legitimate staffing agency.
By using temporary construction staffing services, your business will reap the benefits of having the right people when and where you need them without the overhead and hassle of maintaining a construction workforce. So that you can focus on your construction project and not administrative work, a labor staffing agency will manage all construction labor costs such as recruitment, training, payroll taxes, drug screening, health and unemployment insurance, vacation time, sick leave and other labor costs are all managed by us.Benefits of outsourcing your skilled labor needs include:
Pay for the tradesmen you need, not the tradesmen you don’t! Transform your construction labor costs into a true variable cost by only paying for skilled labor when you need it. Construction projects can change without any warning, and that’s why it’s helpful to rely on a temporary construction staffing services agency to supplement your needs at a moment’s notice. With temporary construction staffing, you can add as many or as little skilled laborers as you need to complement your core team of construction workers. And, you don’t have to worry about paying the costs associated with full-time employees.
Increase revenues and labor productivity. The flexibility of a temporary construction staff is an obvious choice for contractors. When your project is delayed, costs will increase as you add more work days and push your project completion day further back. From unexpected illnesses to increased demands with your current construction project, a temporary skilled labor staff can be added anytime to your core team of professionals so that you will not lose any time working in the field.
Reduce administrative costs. By hiring a temporary construction staffing agency, you reduce unemployment costs, reduce your workers comp exposure and premiums (eliminating risk of a catastrophic injury that could cost you profits for years), reduce costs and time associated with hiring. A specialized staffing agency will also perform background checks on all tradesmen to guarantee certifications and physicals are up-to-date. In addition, construction staffing agencies relieve you from most of the responsibilities associated with payroll, including all employment-related tax filings, obtaining employee benefits, and ensuring compliance with a multitude of safety requirements, etc.
Recruiting and hiring management. Finding candidates who are skilled and reliable is only half the battle. A temporary construction staffing agency provides services that will relieve you from routine human resource tasks so you have the time to focus on the details of your construction plans and meeting your project deadlines. With a labor staffing agency, you save yourself the hassle of posting a job and conducting the search for the perfect candidate. You spend less time sorting through resumes and applications, background checks and drug screenings.
100% satisfaction guarantee. With temporary construction staffing services, a guarantee is usually offered. You need to find a labor staffing agency that stands behind its services and it committed to providing the most reliable, responsible skilled labor staffing in the construction market. Many agencies offer a 100% satisfaction guarantee where if a member of their skilled labor staff does not exceed your expectations within the first 8 hours, they will immediately send a replacement without billing your for the original trades person.
When it comes to construction staffing, you should look for a labor staffing agency that can fulfill all of your temporary skilled labor needs. Using the list above, look for an agency that offers a variety of human resource management services and has a satisfaction guarantee. These comprehensive construction staffing services will give you everything you need to enhance your bottom line. Save time, save money, and build better with a temporary construction staffing services agency.