Some Key Factors in Pricing a Business

The following questions are useful to understand a business and thereby price that business more prudently:

• What's for sale? What's not for sale? Does it include real estate? Are some of the machines leased instead of owned?
• What assets are not earning money? Perhaps these assets should be sold off.
• What is proprietary? Consider trademarks, copyrights, patents, software, etc?
• What is the competitive advantage? Does the business have a certain niche, superior marketing, desirable location?
• What is the barrier of entry? Is it capital, low labor, tight relationships?
• What about employment agreements/non-competes? Has the seller failed to secure these agreements from key employees?
• How does one grow the business? Maybe it can't be grown.
• How much working capital does one need to run the business?
• What is the depth of management and how dependent is the business on the owner/manager?
• How is the financial reporting undertaken and recorded, and how does management adjust the business accordingly?

These are important questions for sellers and their advisors to consider when setting the price of a business for sale. A qualified business broker is an indispensable took to help answer these questions and determine a most probable selling price for the business in its marketplace.

Staffing Decisions - 2 Options if you are going to sell

One area that has the potential to affect the value of your business is the staffing of your business. If you are thinking about selling, you may want to consider two different options.

1. Outsourcing

Many services, especially in today's environmen of the self-employed, can be outsourced. Replacing workers is not pleasant and should only be done if substantial savings can be realized, but outsourcing is worth investigating.

When evaluating the potential savings, you will want to compare the total costs related to the employee (salary, benefits, bonuses, etc.) to the total costs related to outsourcing. You will also want to consider how the change could affect customer service and the morale and productivity of the other employees.

2. Removing Negativity

Now may be the time to get rid of any disgruntled employees. Negative employees hurt a business in several ways. Their attitudes can create a sour environment for their co-workers; their criticisms and complaints can rub off on their coworkers; and their demeanor can leave a negative impression on the customers of the business.

Happy and contented employees make for a profitable business - and it is evident to anyone looking at the business.

Insurance: A Dull Subject Unless You Need It

Most business owners faithfully renew their business insurance policies every year, but how many actually review the policies on a regular basis? Unfortunately, too many business owners have never read the policies. This means, among other things, that they don't know whether the policies are continuing to adequately cover the changing needs of the business. For example, is the new expensive computer system covered? Are all the weather contingencies covered? Is the employee health coverage up to date with today's medical costs? Does you company have business interruption insurance? If so, when was the last time you reviewed it?

Now might be a good time to review all of your insurance policies...
especially if you are considering the sale of the business now or in the future...

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