Published on November 25th, 2016 | by Day Trader
Are You Thinking of Starting a New Business?
The change was fast. In fact, on Wednesday afternoon the small shop on the main street of your hometown was a photography studio and two days later it was a clothing boutique. The owner still had the majority of her studio space set up in back, but the small space in the front of the store that featured some classic clothing designs had expanded. And while it looked like the change happened as quickly as the photograhy studio sign came down and was replaced by the boutique sign, the truth was the that it took months of research and meetings to make the change.
Small business valuation tools helped the owner make a change from her first business where she was the sole owner to the second business which involved two partners. The decision to make creative use of the space that previously only served as a photo studio space was a result of long conversations with a local banker who was very well versed in a variety of business valuation tools. With his guidance the new partners were able to use a couple of different business valuation tools to make sure that they understood the factors involved in this new venture. Understanding the valuation income approach and valuation market approach the new owners were able to enter their partnership completely understanding nearly every aspect of their new business.
Small Business Saturday Is an Opportunity for Locally Owned Businesses to Shine
While the rest of the country is planning and mapping out their routes for the Black Friday madness, a different kind of consumer, however, is looking at small clothing boutiques that have recently been opened and locally owned bookstores that give priority shelf space to regional authors. And while the rest of the nation is worrying about the implications of a new Presidential transition, small business owners around the country just keep working.
Although many large corporations are looking forward to promised tax breaks, it is often the smallest businesses that have the biggest impact on communities. Did you know, for instance, that there are 21.1 million U.S. firms without employees? These individually owned businesses are often quite unique and when it comes time to offer them for sale it can take a different kind of valuation approach. For instance, when there are no other businesses that match the same parameters of a business it can take a variety of business valuation tools to make sure that everyone involved has examined all of the possible approaches.
Some times these businesses are compared to other businesses that have similarities. For instance, business owners can determine the value of a business using these three different approaches. In one method, comparisons are made to recent sales of similar businesses. in a second approach, comparisons are based on the business? earning power and risk assessment. In the third method the valuation is based on the company?s assets.
Understanding the valuation of a business, of course, is the secret to making sure that an owner sells a business for the correct amount. Asking too much for a business can mean that it will never sell. Asking too little can mean that the seller is not going to be properly compensated.
What Kind of Business Would You Start If You Had the Chance?
Whether you dream of opening a boutique or a tutoring center, the goal is to make sure you can earn enough money to live on. You will never, however, earn the money you need if you cannot find out how much you should pay to start a new business. Understanding how much to invest to purchase a business from someone else can be even more complicated. working with advisers who understand how to use a variety of different valuation methods to determine the price of a business will help new business owners better predict what they are getting into. Understanding the assets, the potential, and the risk can help all kinds of business owners make the most informed decisions, whether it is a first time photography studio owner or an owner who has started and sold 15 businesses.
To the rest of the world a business changing hands or expanding may seem as simple as changing the sign on the outside of the building. Investors know better.