The Small Business Valuation Book: Easy-to-Use Techniques That Will Help You Determine a fair price, Negotiate Terms, Minimize taxes

The Small Business Valuation Book: Easy-to-Use Techniques That Will Help You Determine a fair price, Negotiate Terms, Minimize taxes

Lawrence W. Tuller

Language: English

Pages: 310

ISBN: 2:00148190

Format: PDF / Kindle (mobi) / ePub

How much a small business is worth can be difficult to determine, but when a business is about to change hands, a fair and objective valuation is crucial to the sale. This book is an invaluable resource for business owners or buyers looking for accurate small business appraisals. This completely revised and updated book outlines the major valuation methods, including discounted cash flow, excess earnings, asset value, and income capitalization. This edition includes completely new material on the following topics: exploring the 8 myths of business valuations; using the Internet for research; and advice on startups and first generation service businesses. With this book, appraising a business has never been easier?or more accurate!


















To achieve meaningful comparisons, however, adjustments should be made to the accounting records to bring book value into line with accrual accounting standards. Only those balance sheet accounts reflecting assets that are expected to generate earnings for buyers should be included in the calculation. Since accounts such as prepaid expenses or unamortized organization expenses add nothing to the future earnings potential of the business, they should be excluded. One might argue that goodwill

type of business increases, it will drive down the average rate. Commercial rates charged business travelers are the next highest, also pulling the average rate downward. Published rates are higher than commercial rates and appear in hotel publications, directories, and travel agency computer bases, usually quoted in ranges, such as $150 to $200 for a single room. The rack rate is the highest rate charged and is usually posted on the door of each room. When occupancy approaches 100 percent, desk

over the eight-year forecast period may be cause for concern, although it can probably be explained by business cycles. In the preceding three years, the cycles for both stoves and furnaces were flat to rising, whereas the long forecast period witnessed a product cycle crossover in the later years, with stove sales falling and furnace sales rising. Investors might look at this condition as evidence that the addition of more diverse product lines should be considered. Perhaps a less conservative

that new foreign competition will enter the market or even that new products will be developed from synthetic materials, forcing MAPAX into major expansions or product development efforts. The hesitancy on the part of MAPAX management to utilize reasonable leverage might be a serious enough error to increase the capitalization factor. However, it seems unlikely that if such pressures arose, management would not bend to the forces and borrow sufficiently to keep up. Therefore, although

the $100,000 note at maturity equals $71,000.c. The sum of the two present values equals $99,665, which is the market value of the U.S. Treasury note.d. The application of the yield-to-maturity formula previously described with a 22 percent capitalization rate results in a return of 22.11 percent. Annual rental paymentsa. C alculate the present value of a stream of equal cash payments over five years to amortize $85,000 ($100,000 less residual value of $15,000), using a capitalization rate equal

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