Month: September 2010

Business Valuation – What Is a Business Worth?

Determining the value of a business is the first step in the process of buying or selling a business. The value of a business is related to the risk involved, the ability to generate an income stream, and the value of the tangible assets.

An expert business valuation report will be based on standard valuation methodology combined with the experience and knowledge of the valuation expert. The specific purpose of the business valuation and the size of the company will determine the depth of analysis and research required.

Basic factors that influence value are:

  • Value of hard assets
  • Recast cash flow analysis: normalize earnings
  • Review factors that can impact future earnings
  • Calculate and apply external factor discounts
  • Analyze intangible values

 

The final step of a business valuation report is to make sure that the suggested price for the business passes the sanity test:

  • Will the income cover the debt service?
  • Will the cash flow provide the owner or manager with a reasonable salary?
  • Can the cash flow provide for future capital equipment requirements?
  • Will the cash flow provide a cushion to allow for fluctuations in the business cycle?

What Do Business Brokers Sell?

The great majority of business brokers are what we call general business brokers. They sell businesses mostly priced under $500,000. That figure does not include the inventory of the business or the actual real estate if it is owned by the business. Almost all surveys of average selling prices of businesses sold by business brokers show that the average selling price is less than $300,000.

Industry Breakdown:
General Business Brokerage – Businesses priced under $500,000, annual revenues of less than $750,000, and with fewer than 10 employees. This category represents almost 80 percent of all businesses.

The Larger Business – Business priced between $500,000 and $3 million, annual revenues between $750,000 and $2 million, and fewer than 100 employees. This category represents about 11 percent of all businesses.

The Mid-Size Company – Businesses priced between $3 million and $20 million, annual revenues between $2 million and $30 million, and between 20 to 100 employees. This category represents approximately 9 percent of all businesses.

The Larger Company – Businesses priced over $20 million, annual revenues over $30 million, with over 100 employees. This category represents slightly over one percent of all businesses.

How Many Businesses Are There?
Business Size:

  • 1-4 employees: 6,600,000 = 62%
  • 5-9 employees: 1,900,000 = 18%
  • 10-19 employees: 987,000 = 09%
  • 20-49 employees: 680,000 = 06%
  • 50-99 employees: 250,000 = 02%
  • 100-249 employees: 132,000 = 01%
  • 250-499 employees: 32,000 = <1%
  • 500+employees: 34,000 = <1%

Business Buyers: Who Are They?

Buyers of small business are most likely replacing lost jobs or searching for a happier alternative to corporate life. Buyers of mid-sized and large operations are, typically, private investment companies seeking businesses to build and eventually sell for a profit. This is the broadest possible look at the types of buyers out there.

  • Individual Buyer: This is typically an individual who will purchase a business and be directly involved with the day-to-day management of the company. Many of them have come out of corporate America and are first-time buyers. Others are buyers who have owned a business in the past and are looking to once again become their 'own boss'. They generally will attempt to match the type of background or experience that they have with a given business opportunity. The individual buyer usually seeks a business that is financially healthy that will pay them a reasonable salary and any debt service required to purchase the business. Their financing sources are generally SBA loans, owner financing or loans from family members. They very rarely will pay all cash for a business. These buyers will usually limit themselves to transactions involving less than $1 million, cash.

 

  • Strategic Buyer: This buyer is almost always a company, having its goal entering new market share, gaining new technology, or eliminating some element of competition. In essence, it is part of this buyer's strategy (hence the name) to acquire other businesses as part of a long-term plan. Strategic buyers can be either in the same business as the company under consideration, or a competitor. Strategic buyers will be looking chiefly at businesses with sales over $20 million, with a proprietary product and/or unique market share, and effective management in place and willing to remain.

 

  • Synergistic Buyer: The synergistic category of a buyer is usually a company looking to grow by acquiring products or services of a complementary nature. The joining of the two companies will produce more or be worth more than just the sum of their parts. They now have the opportunity to sell the existing customer base additional products or services.

 

  • Industry Buyer: This type is often a competitor or a highly similar operation. This buyer already knows the industry well and, therefore, does not generally pay for the expertise and knowledge of the seller. The industry buyer is interested mainly in combining manufacturing facilities, consolidating overhead, and utilizing the combined sales forces, expanding their operation geographically. These buyers will pay for assets but in most cases, they will not pay for goodwill, covenants not to compete, or seller consulting agreements.

 

  • Financial Buyer: Financial buyers are influenced by a demonstrated return on investment, coupled with their ability to get financing on as large a portion of the purchase price as possible. Working on the theory that debt is the lowest cost of capital, these buyers purchase businesses with the sole purpose of making the maximum amount of money with the least amount of their capital invested.

Buy A Franchise – Convenient Hair Care for the Entire Family

As a walk-in, no-appointment hair cut salon, we are the largest salon franchise in the world. We have perfected a system for delivering value-priced hair cuts to the entire family in a convenient environment. Being positioned in the $55 billion dollar market for the past 28 years, we currently have over 2,800 franchisees.

This opportunity allows you to keep your job and hire a manager to run your salons. Our segment of the hair cutting industry is very recession resistant, very predictable, a simple business plan, technology resistant and a cash business with no sales required!

An ideal candidate for ownership has strong management skills, business management experience, is profit-oriented and needs no hair care experience! The desire to own multiple units is ideal. To give you an idea of our current franchisee ownership, 70% have a white collar executive background, 15% as a diversified business owner and 15% are semi-retired. Our average franchisee owns 5-6 salons after 5 years of operation. It is important for our owners to be skilled at recruiting and motivating staff, somewhat analytical, can follow a system and understand the basics of business.

We can provide you with a very strong Item 19 from our FDD, which outlines average salon revenues, operating cash flow and top 20% of salons earnings. All of our units are 100% franchisee owned with a very high success rate.

Again, this is an opportunity that you can keep your job and build a simple, very profitable #1 branded business. Selecting a franchise is a big step. If you are someone who is transitioning out of Corporate America and has an exit strategy for the future, but wants to keep your professional career, we feel confident of our management opportunity and encourage you to go here to find out if this Beauty/Personal Care, Hair Salon franchise could be a good fit for you!

Buy A Franchise – Residential Cleaning Service

As a maid service franchise owner, you don't lift a broom – you hire people to do the cleaning for your customers. You'll have the satisfaction of growing, managing and motivating a team of employees, but best of all you'll be in a great business for yourself.

Here are some top features of our opportunity:

  • Lifestyle business: M-F, 8-5
  • Cash business, no receivables or bad debt
  • Recurring and predictable revenue (97% retention rate of customers year after year)
  • No inventory
  • By the end of year 2, a manager can be promoted or hired and run 90% of the business
  • Strong Item 19 earning claim!

 

Our initial investment is very affordable as we believe it's important that our new owners get off to the best start possible, saving hard-earned capital to launch the business, retaining more profits to grow their new business. We believe in selling the right size territory to each new franchise owner, using sophisticated demographic data and mapping so a territory can satisfy growth projections.

Our system provides its owners incredible freedom, with weekends off and the opportunity to build an extremely profitable business, all with the credibility of the most recognizable name in residential house cleaning. We have over 25 years of brand equity and millions of satisfied customers. Over the last decade, residential housecleaning has become one of the fastest growing industries in the country. Over 12 million households use paid domestic services.

Our business generates repeat, cash paying customers. There is low inventory with a quick start-up timeframe and our customers find our franchisees. No strong selling required! With multiple revenue streams, it's easy to get excited out the advantages of our business model.

If you have a can-do problem-solving attitude, good management, and leadership background and are ambitious to succeed, lead and belong to a winning team…go here to find our more about ownership of a Cleaning; Maid Service business.