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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.
------
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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:
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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
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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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