5 Reason to get a business appraisal

5 Reason to get a business appraisal

There are many good reasons to get a business appraisal valuation on your business. Here’s a list:

  1. So you can keep track of what business value you are building not just what income you are generating.
  2. So you would know if someone made you an offer to buy your business that you should take. Don’t rely on a buyer doing a business appraisal, you need to have one.
  3. So you know what the Small Business Administration would value your business for if you applied for an SBA Loan. 
  4. So you know how much life insurance you need to buy-out a partner’s interest if something bad happens.
  5. So you know how much you could lose by not properly segregating your personal and business risks. 

Please read number 5 again………..

Is the small business owner world upside down?

This post falls under the category of “what the heck is going on”!

The following is from a small business consultant who talks to small business owners several times a week and has done so for about 10 years. Their name is being with held for obvious reasons.

They say, many of the following are found to be true for abut 75% of small business owners:

  • Business owners who sleep very well ….probably shouldn’t.
  • Business owners think because their employees don’t complain the employees are happy
  • Business owners whose employees complain blame it on the government
  • Business owners personal spending is often unrelated to their personal income, some spend a lot more than they make and some spend a lot less…..very few are break-even
  • Business owners who are chronically behind in paying suppliers are often right on time replacing their boat.
  • For every one minute a business owner spends talking to an employee (shouting instructions doesn’t count) they spend 54 minutes talking to sales people about a new copier.
  • Whenever a customer says “your price is too high” the business owner believes it.
  • Whenever a customer says “your price is too high” the business owner grumbles about how his competitors are losing money.
  • A business owner would rather pay 5% more to a vendor than lose his invitation to the vendor’s hunting trip.
  • For every one minute a business owner spends getting expert advice they spend 92 hours giving it.

Ouch………………

Don’t Let the Doom and Gloom in the Media Distract You!

If you are a small business owner the “psychology” of the day-to-day these days can be discouraging. Don’t let the doom & gloom specialists get you down. Here are a few things to keep in mind that might help you get your mojo back:

  • If your business is down don’t be lulled into thinking that every business like yours is down. There is opportunity in more places that you might be currently considering.
  • If the “economy” is down 10%, so what? If your biz has 1% share of market then you only need to get .2% of the other 99% to be back to even. If your small business is off you can do something about it.
  • Down markets are GREAT times to expand. If your competitors are hiding in a bunker there is a lot of room to grow.
  • Want to be more optimistic? Then stop watching the news or reading the newspaper. Instead study up on marketing….especially new ways to market. Believe it or not…….. every business owner can be a better business owner but only if we let someone teach you something.
You can make your business better, more fun, more profitable and more valuable. Get to work.

What is an “S” Corporation?

An S Corporation is a form of business classified for federal income tax purposes as a corporation that has elected to be taxed as a pass-through entity, in a manner similar to a partnership or sole proprietor.  Unlike a regular corporation, or a C corporation, an S corporation (both names derive from sections of the Internal Revenue Code) generally is not subject to federal income tax.  Instead its income is reported on the tax returns of its shareholders, and they have the responsibility for paying the tax.  If there are losses suffered by the corporation, they also pass through and are reported on the shareholders’ income tax returns.
               Because only the shareholders, not the corporation, are taxed, S corporations avoid the problem of double taxation associated with C corporations.  This is the biggest draw for creating an S corporation, particularly for closely held corporations.
               Shareholders in an S corporation, like shareholders in a C corporation, generally have limited liability arising from corporate matters, even though they pay taxes as if they were partners or sole proprietors.  In addition, when the corporation is eventually sold, there can be reduced taxable gains, as compared with the sale of a business operating as a C corporation.
               On the downside, the limitation on classes of stock in an S corporation provides less control over the company and the value of its stock.  Potential outside investors likely will not be attracted by the pass-through tax characteristics of an S corporation, nor by the limit on the number of shareholders.  Although corporate taxes are avoided, there is still a requirement for filing an informational tax return every year for a corporation with more than one owner.  Finally, if avoiding formalities is an important consideration, it should be noted that, like any other corporation, an S corporation must follow the requirements for having regular meetings and keeping company minutes. 
               The balancing of the advantages and drawbacks of S corporation status in any given case is sufficiently complex that it is advisable to seek professional advice before making this important choice.  
Note: This article provided by Craig Welscher a Houston, TX based attorney. You can contact Craig through www.welscherlaw.com

Document My Systems?…..Which Systems?

Recently I wrote a post about how businesses should document their systems to improve their profits and value.

I received some feedback that went something like this..

“Which systems, there are a million systems in my business!”

Well, you’re correct. Even a small business has many different systems. How you answer the phone, how to install the widget, how to log into your QuickBooks, it goes on and on.

So where should you start?

My advice is to make your first written/documented system the one that is most critical to the success of your business. That means you can rule out how to log on to your computer, how to check voice mail, how to refill the paper in the copier.

Here are some examples of critical systems for various businesses:

  • If you have a staffing firm you need a great system for interviewing potential hires.
  • If you  have an auto repair shop you need a great system for diagnosing car problems.
  • If you own an ice cream store you need a system to make sure the ice cream temperature is always perfect.

What’s the most critical system for your business? You’ll need to decide, then write it down, diagram it, draw it… do whatever you need to do to make sure that someone can do it if you’re on a sail boat in the middle of the ocean.

If it’s in your head it’s only useful to you, if it’s documented it’s valuable.

Why are sytems for your small business so valuable?

Documented business system are far more important than most small business owners believe. I believe that the reason too many small businesses stay small is because they don’t have systems.

When I meet with small business owners and this topic comes up the conversation inevitably sounds like this:

Me, “Do you have your systems documented in writing?”
Business owner, “no, I’m here everyday so I can just tell the people what to do.”
Me, “what if you weren’t here everyday?”
Business owner……. blank stare….

Documented systems are the key to growth. If your business does not have documented systems you can not grow at any meaningful rate for very long and your costs will be needlessly higher. Documented systems cuts down on training and turnover of personnel, both of these lead to higher profits.

If you want to really improve your business and your day-to-day work life….. start today and write out one system.  Choose one that’s easy and that you can immediately review with your employees (after you’ve written the system check with your employees so they can tell you how it is actually being done vs. how you think it’s currently being done).

Writing out systems seems like hard work, and it is…but not nearly as hard as having to make every decision, every day for your entire business.

For some books that might help you get started click here.

Get those systems in place, I promise your business will be better for it.