What’s My Business Worth?

Probably one of the most common questions business owners ask is “What is my business worth?”. Perhaps you want to do some retirement planning, succession planning, divorce planning, estate planning, etc.. This simple question has no simple answer, however. Valuations differ based on their purpose. For instance, the courts and accountants focus on a “Fair Market Value” without compulsion. For the sale of a business, brokers and valuation experts create a “Most Probable Selling Price” that takes the current market conditions into consideration. Let’s assume we’re looking to sell our business, and we want a valuation.

There are three main approaches to determining a most probable selling price:

1) Market Approach
2) Income Approach
3) Asset Approach

The market approach is based on the comparison of “similar” businesses that have sold when compared to ours, then projecting a value for your business. The principle of substitution would suggest that this is a reasonable way to come up with a valuation. There are several problems, such as comparing businesses in different parts of the country, or even state that might make this comparison inaccurate since local economic conditions vary. Also, comparing companies of significantly different sizes can skew the results since buyers typically pay higher multiples for larger companies.

The income approach looks at a view that presumes that a business is a cash generation machine, and you should compare your business to any other investment that generates cash. The big difference here is that small business is risky, so an accommodation for risk needs to be built in. A key part of the process is to identify the cash coming from the business through a process known as recasting. Recasting will take tax returns or financial reports and estimate the cash flow of the business that benefits the owner. This is often referred to as “Sellers Discretionary Cash Flow” (SDCF) or “Seller’s Discretionary Earnings” (SDE), or something similar. This cash flow number is then multiplied by industry specific ratios to estimate a value. Other variations on this method include a capitalization rate applied to the SDCF or looking forward and estimating the SDCF for several years and calculating the net present value of that cash flow (what the sum of future benefits is worth today).

Finally, the asset approach depends on the fair market value of the company’s assets. This is sometimes called the cost approach, since it deals with the physical assets of the business, and doesn’t provide much value for goodwill. In most businesses, goodwill is the majority of the value of the business. This approach is most useful for unprofitable businesses or businesses that have a significant investment in equipment or other assets.

Ultimately, the market determines the price of the business. Because every business is unique, expect negotiation on the price. Buyers buy the whole package, it’s not just price, but the perceived risk of the business, the prestige of owning that business, the volatility of earnings, strength of the industry, the local economy and a host of other factors not easily quantified. The opinion of value is the start of the discussion on what the business will actually sell for. You should get some help when its time to price your business.

Starting an eCommerce Business From Scratch

With the constant growth of the Internet, it has allowed trade opportunities to be more accessible to everyone. Earlier, starting a new business was an enormous job, especially in sourcing the funds for the business. Business owners quit their existing jobs, obtained a loan from the bank before they began to make any money. It is no wonder that more that 50% of them did not succeed. Presently trade opportunities are easily accessible to anyone prepared to invest their time and try to learn all they can about ecommerce. You can establish an ecommerce business with nominal funds and almost no risk at all.

Studies show that about 70% of shoppers perform some sort of research on products online before purchasing them. Savvy shoppers would rather prefer online shopping than actually going out and searching for what they need one store after another. When they shop online they can easily research and compare products, read reviews and select a trustworthy and best rated online retailer with best pricing.

Whether you aspire to become one of those successful and well-known online retailers or just have a profitable ecommerce site that supplements your income, you need to educate yourself about all of the necessary steps you need to take to start an online business.

Below are a few steps that will help you get your ecommerce business started.

Find Your Niche
The most important step in starting your personal ecommerce business is finding your place. Take a look at what interests you and you will find achievable business projects. You can also think about starting a business that is related to your existing occupation. For instance, as an automobile mechanic you may be familiar with automotive spare parts and how to get hold of them. You may possibly start an automotive spare part business. Your acquaintances and knowledge in the industry will help you in your business venture.

Research the Demand
Once you have some possible business projects running in your mind, it is your responsibility to study the demand in that field. If you are planning to open your business and start selling products, you need to get an idea of the market situation, of how much of the products or services you are making are already available. As you start a new business, you may not be able to generate the demand that is required for the product you are marketing to make a huge profit; therefore the articles that you are marketing should already be in the area of demand.

Scope out Your Soon-To-Be Competitors
Before you finally decide on the business project, research your potential competitors. You must visit and know your competitor’s websites thoroughly. Spend some quality time researching all that they deal in, by doing this you will have a plan of the kind of competition you have. You need to understand clearly, that the website you create for your business must be just as professional or superior than their website. The following are some of the things you need to look for:

o Professional Look & Feel
o Products and Services
o Search Engine Ranking
o Page Rank (Available on the Google Tool Bar)
o Keywords
o Back Links (how many sites link to them)

Establish a Business Entity
Next, in order for you to start conducting your business, you need to create a unique business unit and acquire a sales tax ID. At the register office they will check if the name you have selected is already in use or not. If it is in use you will have to use another name. Having one or two options before you start is a good idea.

Open a Business Bank Account
Once you have been registered as the owner of a genuine business, you need to open a bank account specifically for your business with one of the banks in your city. Take your documents to the bank and open a business account. Most banks offer a variety of business accounts. Choose one carefully, the one the best meets your needs. It’s usually best to start with the least expensive account because it could be a while before you start getting an income. Some banks require you to wait a specified amount of time after the court documents are filed before opening a business bank account. These rules are in order to help prevent fraud. Check with your bank to obtain waiting period information.

Choose a Domain Name
As you are waiting for your bank account to be active, you can start creating the website for your business. Firstly you need to register the domain name, search for domain names that end with “.com” as these are the best option. Try to incorporate one or more target keywords, for example, if you are starting an automotive spare part business, choose a name with the word automotive or automobile, such as automotivepoint.com or vehicleparts.com.

Create Your Website
One of the main ingredients to a successful ecommerce business is having a specifically designed website. The business website will probably be the only idea your visitors will ever have in connection with your business. Providentially today, it is not necessary for you to be a high tech programmer in order to create a good website. There are web designing companies that design and sell custom made website templates, or you can have a custom made website. It is advisable to invest a bit of money for a custom made professional website. After all it is your business that you are projecting through the website, so it should speak of quality. You must get a good website template with many pages and custom images. Most templates can be customized with simple HTML editors and an easy graphics program. Templates can be edited without having to invest a lot of time and energy into learning how to write code for web pages.

Open Source Solution
If you are interested in Open Source software then you can go in for Oscommerce, the open source e-commerce solution provider. It is released under the GNU General Public License. They offer everything that you will require for launching and running a successful ecommerce based website. It handles the customer order, product catalog etc., by using administration tools that are easy to install and configure according to your business requirements. Your domain hosting should support PHP & SQL. That is the only requirement you will have to meet.

Paid ecommerce Solutions
You can alternatively opt for paid e-commerce solutions; Yahoo Store is one solution provider. You need to pay a reasonable amount of money to start with Yahoo store but the quality of service offered by Yahoo is great and it is worth the investment. They have ready-to-setup ecommerce solutions from designing the store, adding the products and setting up payment methods

Host Your Website
Once that is settled, you will need to ensure that your website content targets specific keywords. You can do this by writing articles, reviews about products, comparison of different products and a thorough description of the products. Do not repeat the same keywords too often. This makes the text hard to read. After your website has been designed, you must find a web hosting service to host the website on to their server. The web hosting company should also provide custom email accounts along with the domain name. Specific email addresses based on the domain name are very essential for a professional business website. Your website files can be easily uploaded with a simple FTP program. Normally the hosting company’s technical support personnel can help you to upload your files and launch your website.

Implement a Shopping Cart
Every ecommerce website must have a shopping cart. There are many options when looking for a shopping cart to choose from:

Merchant Services
For your online ecommerce business website you need to have a merchant account. This is a bank account will allow your business to accept credit card transactions; this of course will be conducted via a secure encrypted connection. In the event you do not have a merchant account, it is still possible to use the merchant service shopping cart account but this will cost you a bit more.

Hosted Shopping Cart
If your business has just a small turnover and does not have the funds to install your own ‘fully integrated shopping cart’, then you can opt for the hosted shopping cart as this is an equally good option. The hosted shopping cart is comparable to the merchant services as they also offer you an administrative interface so that you can enter your own customized products, pricing and shipping options that you offer from your business.

Fully Integrated Shopping Carts
If you have a business that is ‘booming’ then you will be able to opt for the fully integrated shopping cart. The fully integrated shopping cart is a better option if your business is generating a considerable amount of income. The fully integrated shopping cart as the name states can be integrated to have the same style and look as your website. The fully integrated shopping cart will also include features that are not available in the other shopping carts; you will be able to offer discounts and a variety of other features. You will also be able to notify customers about availability of stock and the various shipping methods that are available for the customer to choose from. Furthermore the customer will be able to check all these without creating an account.

Many ecommerce businesses make the error of using PayPal to accept payments; this immediately shows customers that the business is small and un-professional. An acceptable substitute to PayPal is the ‘remotely hosted shopping cart’. This type of shopping cart will take the trouble of maintaining the credit card numbers and transfer the task to another company. These shopping carts can be designed to integrate with your website. In reality, your customers will not notice they have left your website to complete an order. As your prospective customer clicks on the ‘Buy Now’ button, they are transferred to the ‘remote shopping cart’ to enter their personal details and complete the transaction.

Stock Your Inventory
As your website is now finally created, you need to check your catalog. The first job is finding the manufacturers; you can source this information by checking the websites of your competitor. Sometimes they may provide the name of the manufacturer with the product he provides. Alternatively you can look online or in the ‘Yellow Pages’ of your telephone directory. Once you have the name, you can search for the manufacturer online.

Get in touch with the manufacturer informing them that you are looking forward to being a distributor. Request them for a detailed price list, this price list should help you establish if the profits are sufficient for you to start selling these product.

You might want to ask the manufacturer the following questions:

o What is the MSRP (Manufacturer Suggested Retail Price) for the item?
o Am I required to sell the item at MSRP?
o What is your minimum order quantity/amount?

Promote Your Business

Now that you have your own personalized website up and running and you can start doing business. You can start promoting your business website. If people are unaware that you are open for business, it will not be possible for you to make any sales. Almost all website visits begin from a search engine. Before your website appears in a search engine you must list your website, they have to know that you are out there, ready for business. You will have to submit your ecommerce business website to search engines to be listed in their directories such as Google, Ask, Yahoo, AltaVista and other search engines.

Commencing your very own ecommerce business involves a lot of hard work. Causing it to be a thriving business is even harder work, but the rewards will be greatly satisfying. Due to the increase in technology and the expansion of the Internet, starting an ecommerce business is now accessible to everyone with a computer, a working capital to get started, spare time and simply the aspiration to construct a good ecommerce business.

If You Are Building an Online Business, Here’s Two Simple Strategies For Unlimited Success

The other day I was reading an article that shared some advice Billionaire H.L. Hunt gave to many people in his circle of influence, and it’s certainly worth sharing. Bunker was born into a farming community, he worked hard for many years to try to make something of himself, but ended up bankrupt for his trouble. But after getting his act together and applying the two secrets you are about to learn, he became very successful. His advice for anybody who feels like their life isn’t currently going in the direction they would like it to be is amazingly simple. And sometimes very difficult at the same time.

So what was his advice?

1) Always put your life’s goals in writing

2) Pay in advance

For most of us, our brains respond best to written commands. When you write down the goals you’d like to achieve, whether they are for today, next week or 3 years from now, somehow your brain picks up the vibes and goes to work on helping you to achieve them. You’ve no doubt seen this in your own life. When you set up your day in your diary and plan what you want to get done, you tend to accomplish a lot more than on days where you just bumble along without any sort of plan to follow. Writing out your goals is absolutely crucial to your long term success.

I guess it stands to reason. The vast majority of the world’s population never really get around to writing their goals down on paper. And as we know, the majority of the worlds population is stoney broke, even people who live in the so called ‘wealthy’ countries where opportunities exist everywhere. These days, making it should be relatively ‘easy’ in most parts of the world, and yet for most people it’s not.

Many people set goals in their heads and think that this will be enough. But a goal in your head is like an idea that comes and then is gone. Don’t risk it. Committing your goals to paper and reviewing them regularly ensures that they will be at the top of your thoughts as you go through your day. But written goals are only part of the story – then of course, you have to pay in advance.

What do I mean by paying in advance?

Think of the farmer planting a crop. He doesn’t know if his crop will actually grow, or if he will receive enough rain, or if a fire or natural disaster will destroy his hard work. He has little control over the price he will receive when he takes what he grows to market or who will end up buying it from him. Still, he pays for his seed in advance. And when that seed grows into a beautiful, lush crop, he takes the results of his months of hard work to market and is rewarded because he paid for his seed and did the work required to grow his crop in advance.

As online business owners, we need to do the same thing as our farmer. Building a successful online business comes with a price. You have to pay in advance. You have to be studying, learning and investing in your education all the time, to become what you want to be in the future. There’s simply no way around it, you have to learn before you can earn. When you pay in advance, another important thing happens. You are motivated to get things done because you’ve invested in yourself and you want to see the results from your investment. Bottom line? Success ultimately comes from two simple factors…

1) Put your life’s goals in writing

2) Pay In Advance

I know from personal experience that this works. I never used to write down my goals, I always just ‘knew’ what they were. And I never got anywhere. An old friend, let’s call him David, has always set comprehensive, written goals in every area of his life, but particularly in the financial area. He lived through the hard times, studied everything he could, found a mentor and learned some more… and he became a millionaire several times over…

Now I set written goals and things are really starting to move for me as well

And when I see new online business owners who simple will not invest in information to move forward and make it to the next level, I think to myself, what a waste. Often I hear them complain when they’re asked to spend money on their education. I often hear them saying how expensive things are and how they ‘can’t afford it’, then I know in my heart that unfortunately those people will probably never make have a profitable online business. Quality information gives you the chance to make giant steps forward in your life and your business. Most of the successful people I know have invested heavily in information (when they couldn’t really afford it) and like the farmer, they continue to reap the profits.

I can’t give you the advice on your specific situation, only based on my own knowledge and what I’ve seen others do. But I’ll tell you this. Write down your goals and pay in advance. Pay to learn what you have to learn. Pay the price now, and you’ll be rewarded in ways you can’t even imagine at this point in time.