31 Jul Around the Web: A Week in Summary
A recent article from Portland Business Journal entitled “Myths and truths about business valuation” explains the realities surrounding some of the most common business valuation misconceptions people have today.
While many people understand how an appraisal of real estate is done, it is not the same as a business appraisal. Since a businesses value varies dependent upon the intended use of the end figure, and businesses often carry intangible value, a business valuation is much more complicated than that of a home or property. Because of these factors, many people often misunderstand how business value is determined. Some of the most common myths about business valuation are:
- There is one single value for a business
- A 10% interest is worth 10% of the business
- It’s impossible to value “blue sky” (otherwise known as goodwill and intangible assets)
- I can get a business valuation from an online calculator
- Business value = tangible value + intangible value + business goodwill + personal goodwill
- Any CPA can value my business as long as she has experience in my industry
A recent article from Bakersfield.com entitled “Estate planning tips for small business owners” provides valuable factors to consider when discussing your business with an estate planning attorney.
Starting, developing and running a business can be an exciting and consuming venture. For most business owners, their time and attention for the majority of their years as an entrepreneur is spent working in and on the business today. However, it’s just as important to think about and plan for what will become of your business and its beneficiaries after you are no longer here to run it. Consider these tips when talking with your estate planning attorney in regards to your business:
- Avoid Exorbitant Taxes – Reviewing your personal and business assets as part of a comprehensive estate plan can help minimize the tax exposure of your estate and facilitate an organized transition or sale of the business.
- Create a buy-sell agreement – If your business is owned by more than one person, a buy-sell agreement dictates how the partnership or LLC will be distributed upon one owner’s death or incapacitation. Without one, family members may be stuck owning a business they do not want and partners may be forced to work with people they did not intend.
- Purchase a life insurance policy – A life insurance policy can help to ensure that your family continues to be taken care of financially after your passing.
A recent article from Axial entitled “How Buyers Evaluate Risk: Due Diligence 101” details the areas of a business that are inspected by a buyer during the due diligence process and what a seller can expect.
Due diligence refers to the process during which buyers dig into the tangible and intangible areas of a business in an attempt to evaluate whether or not the transaction is a good fit for them. Once an LOI or Letter of Intent is received, business owners can expect the following areas of their business to be evaluated:
Depending on the industry your business is in and the individual interested, this list can certainly be longer. Buyers will also typically request a wide range of documents to support their research into your company. As a seller, it can be helpful to seek out and utilize advisors who can work with you and prepare you for this sometimes lengthy yet necessary process. Ultimately due diligence protects everyone involved in the sale in the long-term.