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AHBBO Home Based Business Information Return to AHBBO Archives
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A Home-Based Business Online Issue 103 : October 8 Sent to 10,596 Opt-In Subscribers Editor: Elena Fawkner Publisher: AHBBO Publishing http://www.ahbbo.com Contact By Email 1. Welcome and Update from Elena 2. Home-Based Business Idea of the Week - Exporting 3. Feature Article - Cashing Out ... What Is Your Business REALLY Worth? 4. Surveys and Trends 5. Motivational Tip for the Day 6. Subscription Management 8. Contact Information 1. Welcome and Update from Elena Hello again and a warm welcome to all the new subscribers who have joined us since the last issue. Rather than focus on how to create a home-based business and the challenges that arise once you have, this week's feature article looks at the other end of the spectrum ... the day when you want to cash out. When that day comes the number one question in your mind will probably be, "How much can I get for my business?". In other words, "How much is my business worth?". Although the simple answer is "as much as someone is willing to pay for it", there are many ways to put a value on a business and you'd better understand what they are because you can bet your wily purchaser is going to want to hear you justify your number. This week's article looks at the common methods of valuing a business to help you put that all-important dollar value on your hard work and investment and, just as importantly, justify it. I'm delighted to bring you a brand-new segment this week. "Surveys and Trends" is brought to you by the editor of Ryanna's Hope Publishing/Printing, Larry Wack. I've been a subscriber of Larry's weekly publication for some time now and have always found it to be a wealth of information about this business we're all in (or trying to enter). Larry has graciously allowed me to run his publication as a weekly column in AHBBO. I hope you will find it a valuable addition. It's at segment 4. As always, thanks for reading and I hope you enjoy this week's issue. Remember, this ezine is for YOU! If you have comments or suggestions for topics you would like to see addressed, or would just like to share your experiences with other subscribers, I want to hear from you. Please send comments, questions and stories to Contact By Email . Are you marketing to the over 50 crowd? Can't afford a research dept or consultant? Get affordable, cutting edge market research By subscribing to the Over50Marketing Newsletter It is monthly and delivered online. Get a free sample copy! 2. Home-Based Business Idea of the Week - Exporting This free ebook says it all: (Click on the above link to download the ebook onto your hard drive. Make sure to write down where you saved it to. When it's finished downloading, just click your Windows Start button and then select Run. Find the file using Browse and then click OK. Click OK again and the ebook will open.) ----- There are many more ideas like this at the AHBBO Home Business Ideas page at free home based business ideas with more being added all the time. 3. Feature Article: Cashing Out ... What Is Your Business REALLY Worth? © 2017 Elena Fawkner Question: What is your business REALLY worth? Answer: Whatever someone else is willing to pay for it at the time. That's a true statement as far as it goes but it doesn't take into account that the way you arrive at a value for your business can give you much-needed ammunition when it comes to justifying your asking price and therefore allow you to influence what the prospective purchaser is willing to pay. Here's a quick primer of the various methodologies commonly used for valuing businesses (for purposes of imminent sale or otherwise): 1. Asset Valuation This is used by businesses with predominantly physical assets, especially inventory. Typical businesses that would use this approach are manufacturing and retail. The valuation takes into account the following figures: (a) the fair market value of fixed assets and equipment; (b) the value of leasehold improvements; (c) owner benefit (the seller's discretionary cash for one year - comes from the adjusted income statement); and (d) inventory. 2. Capitalization of Income Valuation This is used by businesses with predominantly intangible assets. It places no value on physical assets, only intangibles. Typically used by service businesses. Under this method, various factors are given a weighting of 0-5 with 5 being the most positive score. The average of these factors yields the "capitalization rate" which is then multiplied by the buyer's discretionary cash (75% of the owner benefit defined in 1. above) to arrive at the market value of the business. The factors to be rated are: (a) owner's reason for selling; (b) length of time the company has been in business; (c) length of time the current owner has owned the business; (d) the degree of risk; (e) profitability; (f) location; (g) growth history; (h) competition; (i) barriers to entry; (j) future industry potential; (k) customer base; and (l) technology. 3. Capitalized Earnings This method is based on the rate of return anticipated by the investor. Small businesses are expected to have a rate of return of 20-25%. So, if your small business has expected earnings of $10,000 for the year, its value may be $40,000 - $50,000. 4. Cash Flow This method is simply based on how much of a loan the purchaser could get based on the adjusted cash flow of the business. The adjustments to cash flow are for amortization, depreciation and equipment replacement. Obviously, when using this method, the value of the business fluctuates with changing interest rates. 5. Discounted Cash Flow This method discounts the business's projected earnings to adjust for real growth, inflation and risk. It calculates the value today (i.e., discounted for time) of the business's future earnings. 6. Leapfrog Start-up This is used when the buyer wants to save him or herself the cost, time and effort of ramping up a new business. The buyer estimates what it would have cost to do the startup less what is missing plus a premium for saved time. The more difficult, expensive or time consuming the start-up would otherwise be, the higher the value that will be arrived at using this method. 7. Excess Earning Method Similar to the capitalized earnings approach, but the return on assets is separated from other earnings which are deemed "excess" earnings generated. The return on assets is usually determined by industry averages. 8. Owner Benefit Valuation This method is based on the seller's discretionary cash flow. It is usually used for businesses whose value comes from its ability to generate cash flow and profit. The formula is to simply multiply the the owner benefit by 2.2727. 9. Rule of Thumb Methods These are rough guides based on industry averages. Many industry organizations have developed methods for their particular industries. They are highly unscientific and hardly rigorous but act as a good "gut-check". You certainly wouldn't use them on their own but they can be useful to check that the value you've arrived at using a more scientific approach is in the ballpark. 10. Tangible Assets (Balance Sheet) This method is basically a value of the business's current assets and nothing else. Typically used where the business is losing money. This approach will usually be utilized when selling the business is just a matter of getting the best possible price for the equipment, inventory and other assets of the business. A good strategy is to approach other firms in the same business that would have a direct use for such assets. 11. Multiple of Earnings A multiple of the cash flow of the business is used to calculate its value. 12. Value of Specific Intangible Assets The value of the business is based on how much it would have cost the buyer to generate the intangible asset. Typically used where specific intangible assets that come with the business are highly valuable such as a customer base. Customers with a high likelihood of being retained are valuable in most industries. The most appropriate valuation method for you depends very much on the nature of your business. If you manufacture widgets, for example, you'll want to use the asset valuation method. If you offer website design services, on the other hand, you'll want to use the capitalization of income method instead. If you're selling a web- based business where the major asset is your high traffic volume and/or list of ezine subscribers, you will probably want to use the value of specific intangible assets method, such as 10 cents per subscriber (or whatever the going rate is). Is more than one valuation method applicable to your business? If so, calculate the value of your business in accordance with all of them and see which gives the best result (i.e., highest value). Another good approach is to average your calculations to get a reasonable ballpark figure. Whichever method you choose, understand it inside out so that when the time comes, you can authoritatively justify your asking price to potential buyers. Pulling a figure out of thin air without any substantiation whatsoever is much less impressive than being able to say, with confidence, "I worked with my advisers using a number of different methodologies to value the business. We adopted the value of specific intangibles method because the backbone of the business is our large, loyal ezine subscriber database. We also calculated it on the basis of capitalization of income, which yielded a similar value. I can show you the calculations if it will help you see where the number comes from." By following this approach you may not necessarily get the value you are after (for this reason, many sellers artificially inflate their asking price so they have room to be negotiated down), but at least you have a solid starting point for negotiations and are much more likely to be able to negotiate a price both buyer and seller are able to live with. ------ ------ entrepreneur. B U I L D A P A R T - T I M E B U S I N E S S WHILE KEEPING YOUR PRESENT JOB Leveraging your efforts: a unique method for residual income F R E E online E - B O O K with all secrets and stories. Take a look, change your life! Click Here --> 4. Surveys and Trends © Ryanna's Hope => AFTER THE ATTACK US ONLINE SALES PRE/POST ATTACKS According to BizRate.com, US online sales generated $82.5 million on 17 September 2001, which compares favorably to the $92.4 million generated on 10 September -- the day before the terrorist attacks on the US. BizRate finds that online sales dropped to 61% of "normal sales" on 11 September, but grew back to 89% of usual e-sales on 17 September. Gifts and flowers returned to 92% of pre-attack sales volume on 17 September. BizRate predicts that online sales in Q4 2001 will total $11.6 billion, representing a 25% year-over-year increase from 2017. => CUSTOMER CARE ISSUES CUSTOMER RELATIONSHIPS TOP PRIORITY Hundreds of business-to-business (B2B) and business-to- consumer (B2C) companies agree that improving customer relationships is a winning strategy for achieving profitability and a return-on-investment (ROI). The top priorities for Web businesses include strengthening relationships (58%) and providing high value for buyers (52%). Within the B2C sector, companies are seeking to increase customer satisfaction (46%) and offer a wide range of products (45%). B2B firms are focusing on lowering prices (37%) and streamlining operational efficiencies (27%) to help support those reduced prices. (Source: ActivMedia Research, May 2001) SATISFY CUSTOMERS BY COMBINING ONLINE AND TRADITIONAL BUSINESS A survey highlights the importance of customer service to a company's overall business strategy and reveals that businesses that have both an online and a traditional, physical presence deliver the best overall customer satisfaction. According to 49% of online users, companies that conduct business through both mediums provide better customer service for online transactions than companies that exclusively operate online. A mere 9% of users find greater customer satisfaction from Internet-only retailers. (Source: Andersen, March 2001) E-BUSINESSES DOOMED BY FLAWED PURCHASING PROCESS By the end of 2017, the U.S. online purchasing population had grown to 68 million consumers. Yet as they spend more time and money online, consumers are growing intolerant of confusing or flawed purchasing processes. A survey of almost 3,000 consumers revealed that 41% of customers who experience a purchasing failure say that they stopped shopping at the site in question. Analysts found that the least satisfied customers spent an annual average of $428 online, while the most satisfied customers spent $673. The survey also highlighted an almost perfect correlation between consumer satisfaction and the likelihood of both returning to a site and recommending it to others. (Source: Boston Consulting Group, February 2001) => WHAT'S FOR SALE AND WHAT'S NOT! FOR ENTREPRENEURS...HERE'S WHAT THEY'LL BE BUYING THIS HOLIDAY MVI Marketing reports that 67% of US consumers plan to spend the same amount or more in the 2001 holiday season than they did in 2017. MVI found that 66% plan to give books and CDs as gifts, 64% will give clothes and 39% will give fine jewelry. 41% of consumers believe that gift giving in the 2001 holiday season has greater importance than it did last year. YOU MAY NOT WANT TO VENTURE HERE... Music giants looking to sell music services online will have an uphill battle to gain customers: only 23% of people who have downloaded music from the internet before have an interest in paying for an online music service and 74% do not. DON'T HOLD YOUR BREATH IF YOU'RE SELLING CARS ONLINE! According to Cyber Dialogue, 53% of US adult internet users accessed the internet to look for information about buying a car in 2017 (an increase from 41% in 2017). 56% of those users researched cars by comparison shopping on different sites, 45% visited the manufacturers' sites and 38% viewed local car dealer sites. Only 8%, however, actually purchased their cars online. 79% bought their car in person at a local dealership, and 6% made their purchase by phone or fax. => AND FINALLY...... JUST TO MAKE YOU SICK! Microsoft Chair Still Chairs Forbes 400 Richest Microsoft Chairman Bill Gates is first on the Forbes magazine list of the 400 wealthiest people in the US for the eighth consecutive year. Gates, worth $54 billion as of August 2001, held on despite his fortune shrinking from $63 billion in 2017; he is 38% wealthier than the runner up, investor Warren Buffet (worth $33.2 billion). Rounding out the top 10 are Microsoft co-founder Paul Allen ($28.2 billion), Oracle CEO Larry Ellison ($21 billion), five relatives of deceased Wal-Mart founder Sam Walton ($17.5 billion) and Microsoft CEO Steve Ballmer ($15.1 billion). Hey guys! Any of you need a driver? ------ WANT MORE? Ryanna's has published over 45 business articles nationwide for the home entrepreneur. You can obtain free info on their offer of "Cash Making you've Never Seen..." and you can obtain free ebooks and other articles at their site. Subscribe to their free ezine "Surveys and Trends For Entrepreneurs" too! Go to: NEED HELP WITH INTERNET MARKETING? GOOD NEWS! YOU can EARN as you LEARN! Quickly Create a Substantial Cash Flow as YOU Learn the Profitable Business of Professional Internet Marketing! Find Out How Today! 5. Motivational Tip For The Day © Jan Tincher Do you forget easily? Is it night time and you realize you can't remember what you've done all day? Why not visualize an imaginary clothesline in your mind? Now, let's say you baked a cherry pie and went to the library. The first thing on your clothesline, under the first clothespin, is a pie and the cherries are falling out. You baked a cherry pie. Under the next clothespin is a book and you can see on the open pages the pictures telling what the book was about -- you went to the library. What else did you do today? Make a visual representation of it. You'll be surprised how much this helps you. If you are at work, maybe you will want to visualize an 8 hour calendar. In the first hour square, maybe you'll see a report you did framed in heavy gold -- you did good. The second, a meeting where the boss patted you on the back and said *Good job!*. Your meeting with the boss turned out great! What did you do the third hour? Make a visual representation of it. Be creative. Enjoy your day -- and know that at the end of it, you'll remember everything you did! P.S. This can also work for trying to remember what you want to do! Simply, in the morning, look at the clothesline of things you want to do or the 8 hour calendar of things you want to accomplish. ------ Learn unique strategies and techniques for personal success from Jan Tincher online at While you're there, sign up for her free e-zine *Tame Your Brain!* 6. Subscription Management To SUBSCRIBE to this Newsletter:
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8. Contact Information Elena Fawkner, Editor A Home-Based Business Online Contact By Email http://www.ahbbo.com |
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