Lisa Holton, Jim Bates

Business Valuation For Dummies (eBook, ePUB)

• Format: ePub

Produktbeschreibung

Buying or selling a business? Acquire the tools and learn the methods for accurate business valuation Business valuation is the process of determining the value of a business enterprise or ownership interest. Business Valuation For Dummies covers valuation methods, including advice on analyzing historical performance, evaluating assets and income value, understanding a company's financial statements, forecasting performance; estimating the cost of capital; and cash flow methods of valuation. Written in plain English, this no-nonsense guide is filled with expert guidance that business owners, managers at all levels, investors, and students can use when determining the value of a business. It contains a solid framework for valuation, including advice on analyzing historical performance, evaluating assets and income value, understanding a company's financial statements, estimating the cost of capital, business valuation models, and how to apply those models to different types of businesses. Business Valuation For Dummies takes you step-by-step through the business valuation process, explaining the major methods in an easy-to-understand manner with real-world examples. Inside you'll discover: * The value of business valuation, including when it's necessary * The fundamental methods and approaches to business valuation * How to read a valuation report and financial statements * The other players in the valuation process * How to decide you're ready to sell -- and the best time to do so * The three stages of due diligence: the meet and greet; the hunting and gathering; the once-over * How to decide you're ready to buy -- and find the right business for you * What due diligence means on the buying side of things * When to call in the experts: divorce; estate planning and gifting; attracting investors and lenders This is an essential guide for anyone buying a business, selling a business, participating in a merger or acquisition, or evaluating for tax, loan, or credit purposes. Get your copy of Business Valuation For Dummies to get the information you need to successfully and accurately place a value on any business.

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Produktdetails

• Verlag: Wiley-Scrivener
• Seitenzahl: 368
• Erscheinungstermin: 23. April 2009
• Englisch
• ISBN-13: 9780470523384
• Artikelnr.: 37294524

Autorenporträt

Lisa Holton is a former business editor and reporter for the Chicago Sun-Times. Today, she heads The Lisa Company, a writing, editing, and research firm. She's a writer for corporations, colleges, and nonprofits nationwide, and has written more than 13 books. Jim Bates is Vice President, Transaction Support, for the Christman Group, a middle-market investment banking firm based in Palatine, IL

Inhaltsangabe

Introduction 1
About This Book 1
Conventions Used in This Book   2
What You're Not to Read 3
Foolish Assumptions   3
How This Book Is Organized 4
Part I: What Business Valuation Means 4
Part II: Getting Familiar with Valuation Tools, Principles, and Resources
  4
Part III: If You're Selling a Business   4
Part IV: If You're Buying a Business 5
Part V: Don't Try This at Home! Turning Things Over to the Valuation
Experts 5
Part VI: The Part of Tens   5
Icons Used in This Book   6
Where to Go from Here   6
Part I: What Business Valuation Means 7
Chapter 1: The Value of Understanding Business Valuation   9
Basic Tenets and the Importance of Valuation for Businesspeople   10
Value differs from price 10
Planning drives value 10
No two valuations are exactly alike   11
Valuation isn't a one-time deal   12
The Basic Building Blocks for Calculating Value   12
Discount and capitalization rates: The numbers that really matter   13
Doing your homework: Due diligence   13
How rule of thumb enters into business valuation   14
Getting Expert Help   15
The Move toward Intangible Asset Valuation 16
Family Businesses: Important Valuation Targets 16
Chapter 2: What Triggers a Business Valuation?     19
Exploring Reasons for Wanting a Business 20
It's time for a new career 20
You're fulfilling a dream 21
You're taking advantage of a strategic opportunity 22
You're buying a business to pass on to your heirs   23
Shaking the Money Tree: How Lenders Make Thorough Valuation a Necessity 24
Borrowing to buy a business: What lenders want to see   25
Preparing for mergers and other big-money deals 26
Seeking new or continued funding for an existing business 27
Attracting public or private investors 27
What If You Want - or Need - to Sell a Business?   28
Doing some smart estate planning 28
Reaching retirement 29
Letting the kids take over   29
Facing threats from market forces 30
Separating from a co-founder or partner 30
Dealing with divorce 32
Exit Plans: Writing the Ending 32
Who benefits from an exit plan? 33
When should an exit valuation be done? 33
Chapter 3: Understanding the Tangibles and Intangibles of Business
Valuation   35
Examining Your Reasons for Valuing This Business   36
Introducing Standards of Value   37
The mother of all standards: Fair market value   38
Perceptions of investment value   38
The fundamentals of intrinsic value 39
Going over going-concern value 39
Liquidation value   40
Adjusting or Normalizing a Financial Statement   41
Other Considerations: Science Meets Art 42
Adding business and economic news   42
Folding in tangible assets   43
Drawing valuation conclusions with intangible assets   43
Chapter 4: Approaches and Methods - Basic Theories of the Valuation Process
  45
A Step-by-Step Overview of the Valuation Process   47
Risky Business: Gauging Circumstances for the Best Results   49
Understanding the different approaches 50
Calculating risk and its relationship to present value 55
Using discount and capitalization rates and income valuation methods   56
Chapter 5: The Challenge of Valuation in a Knowledge Economy   61
Moving from a Hard-Asset to an Intangible-Asset Economy 61
Reviewing types of assets   62
Recognizing the increasing value of intellectual property   63
Determining the Value of a Company Based on Ideas 64
The importance of real, documented income 64
What strategic buyers and lenders want to see 66
Reaching Intangible Value 67
Taking a stab at brand valuation   67
Recognizing customers as valuation drivers   69
Preserving Your Knowledge Business for the Future   70
Shaky times: When the founder's brain leaves the building 70
What owners need to do: Planning ahead 71
Part II: Getting Familiar with Valuation Tools, Principles, and Resources
73
Chapter 6: Getting Familiar with a Typical Valuation Report   75
What a Valuation Report Is Supposed to Do 76
Outlining a Typical Valuation Report   76
Cover   77
Valuation summary 77
Valuation assignment 80
Economic outlook 81
Industry outlook   82
Business overview   83
Conclusion of value   85
Appendixes   86
Chapter 7: Meeting the Supporting Players in the Valuation Process   87
Getting Help in Valuing Your Business   87
Recognizing situations that call for valuation experts 89
Finding the experts you need   90
Seeking the qualities your experts should have 91
Appraising What Appraisers Do 92
How appraisers are trained and certified   93
What appraisers cost 95
How to examine a business appraiser's work process   96
What to ask a prospective business appraiser 97
Taking Account of Accountants   98
How accountants are trained   99
How accountants are certified   100
What accountants cost   101
How to examine an accountant's work process 102
What to ask a prospective accountant   102
Hiring Advocacy: Attorneys   103
How attorneys are trained and certified   104
What attorneys cost 105
How to examine an attorney's work process   105
What to ask a prospective attorney 105
Brokers: One-Stop Valuation and Sale Services   106
How business brokers are trained and certified 107
What business brokers cost   108
How to examine a broker's work process 108
What to ask a prospective business broker   108
Chapter 8: Understanding Financial Statements   111
Gathering the Financial Data You Need 112
Looking into Support Data   112
External data 112
Internal data   113
Taking a Look at Financial Statements   114
The balance sheet 114
The income statement   118
Statement of retained earnings 122
Cash-flow statement 123
Ratios and formulas for valuation   126
Chapter 9: Using Rule-of-Thumb Valuations for Mom-and-Pop Businesses   131
What Rules of Thumb Do in Business Valuation   132
2008 Rules of Thumb from the Business Reference Guide   133
Full-service restaurants   133
Bars 135
Gift shops 137
Medical practices   138
Auto repair shops 140
Day-care centers for children   142
Dry cleaning 144
Coin laundries 146
Bookstores 149
Bed-and-breakfasts 149
Part III: If You're Selling a Business 153
Chapter 10: Making Sure You're Ready to Sell     155
Understanding Why Timing Is Important   156
Examining the Motivations behind a Potential Business Sale   156
Anticipating the owner's retirement   158
The kids are taking over!   158
Weighing the possibility of a merger or acquisition from a friendly suitor
159
Changing market conditions are threatening a company's future 159
Bringing Valuation into the Picture before You Bring In the Buyers 159
Providing a reality check 160
Transparency: Preparing for a sale   161
Heading off problems to increase value   162
Determining the Kind of Transaction You Want   165
Outright sale   166
Employee stock ownership plan (ESOP) 166
Ownership transfer to key family members   166
Chapter 11: Deciding What to Do about the Family Company   167
Planning for the Worst Possible Scenario 168
Examining the State of the Family Business   169
Specific characteristics of family companies   169
How families hurt the value of their businesses 170
Why "equal" in a family business isn't always fair 174
Getting Your Family Down to Business 175
Following a phased-in approach 176
Addressing the fairness question head-on   178
Setting up the best plan for the generations 178
Chapter 12: Due Diligence on the Sell Side   181
Looking at Why a Seller Has to Do Due Diligence   181
Understanding the Three Stages of Due Diligence 183
Tricks of the Trade: Collecting and Exchanging Information 184
Gathering your own company data   184
Protecting your company with a confidentiality agreement 187
Chapter 13: Case Study: Valuation on the Sell Side     189
Heading Off Common Valuation Disasters   190
Writing down your wishes 190
Making sure that your records are adequate   191
Taking time to plan 192
Considering confidentiality 192
Setting Up Your Prevaluation Plan 192
Finding the problems 193
Analyzing the prevaluation   195
Performing the Valuation   196
Taking valuation from fantasy to reality   196
Checking the structure of the deal 200
Looking at an example of a deal in progress 201
Part IV: If You're Buying a Business 203
Chapter 14: How Do You Know Whether You're Ready to Buy?   205
Knowing What Typically Drives a Business Purchase 205
Getting Ready to Buy 206
Tackling challenges unique to buyers   207
Looking at whether the business is right for you 208
Evaluating a failing business 209
Understanding how the mating process (typically) works 211
Restarting the Value Process   213
Chapter 15: Moving from Valuation to Negotiation   215
Knowing What Valuation Does for the Dealmaking Process 216
Identifying potential pitfalls and opportunities   216
Timing the purchase well   216
Minimizing emotional shocks   217
Getting Ready to Meet the Seller   217
Recognizing window dressing 218
Remembering motives 218
Knowing what sellers want   219
Let's Make a Deal: Negotiating   219
Deciding whether to handle negotiations yourself   219
Getting ready to negotiate 220
Understanding what you should do in negotiation   222
Working with someone who's negotiating for you 223
Chapter 16: Due Diligence on the Buy Side     225
Seeing What Due Diligence Means in Practice   225
Looking at the Unoffi cial First Stages of Due Diligence 226
Researching the company 227
Consulting your family and the pros   228
The Informational Game Plan: Cracking the Books (and the Internet)   229
Gathering the Company's Data 231
Knowing which questions to ask about the target company   232
Checking with the company's departments   233
Collecting Outside Data about Your Industry and the Economy 235
Chapter 17: Forensic Accounting and the Due Diligence Process     239
Understanding Forensic Accountants 239
Characterizing a qualifi ed forensic accountant   240
Recognizing situations that link forensic accounting and valuation 243
Comparing Basic and Forensic Accounting   246
Recognizing Business Situations That Trigger Forensic Accounting   247
Doing a Forensic Accounting Test   248
Looking at Forensic Accounting Case Studies   249
Chapter 18: Case Study: Valuation on the Buy Side     251
Being Frank: Selecting an Industry 251
Doing Research in Advance 252
Contacting the Target   253
Negotiating the quick-and-dirty valuation stage 253
Knowing when to talk and when to hang up 254
Moving on to Company Number Two   254
Seeing How Failing to Consult an Advisor Can Cost You   255
Knowing when to involve advisors 255
Encountering problems   256
Seeing what could've been done 258
Checking Benchmarking Data 258
Understanding Deal Structure   259
Part V: Don't Try This at Home! Turning Things Over to the Valuation
Experts 261
Chapter 19: Divorce   263
Doing Estate Planning Regardless of Marital Status   263
Planning Prenuptial and Postnuptial Agreements 264
Breaking down a prenuptial agreement 265
Creating a postnuptial agreement   267
Seeking the Correct Professionals   267
Looking at What Happens to a Family Business in Divorce   268
State laws on splitting property   270
The marital balance of power 271
Determining the Business Value in a Divorce 272
Keeping Valuation Dates in Mind 273
Chapter 20: Estate Planning and Gifting     275
Succession Planning: A Critical Part of Business Planning 276
Considering Family Matters   276
Anticipating problems   276
Considering blended and nontraditional families   277
Creating contingency plans for relatives who renege   278
Creating a Succession Plan   279
Creating an Estate Plan   280
Finding the Experts You Need for Estate Planning   281
Fitting Buy/Sell Agreements into Estate Planning and Valuation 282
Taking Gifting into Consideration   283
Gifting strategies 283
Gifting techniques 284
Chapter 21: Attracting Outside Investors to Your Startup     287
Exploring Your Startup Resources 288
Seeing How Valuation Professionals Work with Startups 290
Creating the Starting Point: The Business Plan   291
Working with Investors   292
Angel investors   293
Venture capitalists   294
IPO investors 295
Part VI: The Part of Tens 297
Chapter 22: Ten Reasons to Consider a Prenup   299
It Gets You to Talk Honestly about Money at the Start of a Marriage   300
Your Life's Work Shouldn't Go down the Drain   300
If Both Spouses Have Sacrificed to Build the Business, They Need to Share
  301
The Working Spouse Shouldn't Lose the Business Entirely 302
Kids from Earlier Marriages Need Protection 302
Kids from Your Next Marriage Need Protection, Too   304
Planning for Worst-Case Scenarios Is a Good Habit 304
Your Business and Personal Finances Really Are Connected   305
Family Legacies Need Protection 305
When a Marriage Ends, a Prenup (Or Postnup) Can Save You Both Money 306
Chapter 23: Ten Questions to Answer Before Considering a Partnership
Agreement     307
Who Will Be in the Partnership? 308
How Much Capital Does Each Partner Have to Kick In at the Start?   308
How Will Decisions Be Made? 309
Do You Have a Plan for Resolving Disputes?   309
How Will the Firm Admit New Partners? 310
How and When Will Profits - or Losses - Be Shared?   310
What Happens If a Partner Leaves or Dies?   311
How Will the Partnership Be Sold or Dissolved?   311
How Will Legal Disputes inside and outside the Partnership Be Handled? 312
Will Noncompete Issues Be Covered?   312
Chapter 24: Ten Things to Consider Before Transforming Your Company Into an
ESOP     313
Research How ESOPs Are Created 314
Understand Why ESOPs Are Attractive in Certain Situations 314
Know How the Tax Advantages Work   315
Examine How Valuation Comes In   316
Get a Handle on Your Launch Steps 316
Prepare for Preparation Costs   317
Get Ready to Train Next-Generation Leadership 317
Plan Ongoing Training for Employees 318
Estimate ESOP Costs after Launch 318
Realize That ESOPs Can Fail   318
Glossary 319
Index 327