Business valuation is not easy, because business -is not gold or petrol, which have a clear market value. Here the situation is more complicated, because even appreciating a vegetable tray before buying; you need to consider many aspects. Take the right decision: determine whether you have enough skill to calculate independently the profitability of the transaction or better to turn to professionals who are engaged in the evaluation of business before buying. Well, if you do you ready to do it by yourself, experts recommend the following approach: profitable, market and costly.
When the income approach the value of the company is determined by the expected profit. This method assumes that the buyer does not pay for business more than the current value of future earnings for certain period of time. Applying it, an employer calculates the various options for business development. But in this approach the level of risk is often defined too subjectively. This evaluation method is good if the company’s profit is positive and stable. With a market approach value of the business is evaluated by comparing the sales of companies of comparable size in recent years. The main condition of such a strategy – is a formed market. The cost of estimated company is defined as the product of the ratio of the market price of the company and its analog baseline to baseline of evaluated company. As a baseline typically there are: net income, book value of the enterprise. When choosing matched companies they are guided by the following: industry of the enterprises should be the same, the quantitative and qualitative characteristics of the companies should be approximately equal. When the cost approach the business value is defined by the sum of resource costs for its reproduction or replacement, taking into account wear and tear. This option is the most effective when the buyer is going to compare the costs of acquiring firms with the costs for creation a similar enterprise.
Further, it is useful to know financial condition of the enterprise not from the words of the seller and not even from the documents (after all, a clever accountant-general will always find where and what to “hide” from prying eyes), but from an auditing company. In this case, a comprehensive audit is not required. Ask two or three specific questions: what targets and potentially unforeseen expenses, losses await the company in the next month, half a year (taxes, debts, fines, penalties, etc.) Believe me, this way you can learn a lot of new information about business.
The most significant in this case – is not to be afraid to pay the professionals. Sometimes you should not rely only on yourself and fear of prices for the work of lawyers and auditors. If you purchase a new business worth 100 thousand dollars and more expensive, then to spend 2-10 thousand dollars to the legal and financial audit – means correctly and carefully manage your money. Otherwise, you may lose more. Also do not forget that having armed with formal conclusion of legal and auditing firms, which will surely reflect shortcomings of the enterprise, you will be able to undercut seriously the seller’s price and in the end – to save.
Business has always been a dream for many people. But nowadays business has become not only a kind of activities and occupation – it has turned into goods. It is not a rare case today when someone buys and sells businesses just to make money on it. Whereas another part of businessmen sells their businesses because of some troubles or inability to conduct it any more. In any case when selling a business it is better to address to experts who deal with it. And here business for sale site would be of much help because there one can learn much details related with this process. Those who live in Canada are advised to visit toronto business for sale or vancouver business for sale experts.
And keep in mind that before dealing with any issue it is wise to investigate it. And today it is quite easy to do as online technologies give a nice opportunity to find anything you require.