NLP Sell Marketing

Robert Landron asked:


Between so much of varieties of credit cards, one of the most underestimated when accepting credit card for business is the value of the credit card. Many people do not choose to request a credit card of businesses because except having a definite target for the owners of businesses or the businesses director it seems to be complicated to employ. Although a credit card of businesses has more conditions and has more raised interests compared with other types of credit cards there is, contrary to the common design, it can very useful if be used correctly.

What is the big deal of business credit card?

Basically, business credit card is for the business people’s consumption. Compared to the regular credit card setup, a business credit card has a high limit plus low interest rates. Depending on the manner of choosing, a business credit card may also bring a lot of automatic benefits. There are come bank which also offer free business credit cards for the eligible owners.

Since it is targeted towards businessmen or those people who are heading towards building a business, a business credit card can definitely benefit these small businesses. A business credit card helps the budding business by extending payments while improving the cash flow. Aside from bearing the image of a dependable credit card, business credit card boasts of having detailed reports and giving quality customer service as its major trademarks.

Aside from having limits and low interest rates, a business credit card provides many alternatives and numerous credit options for small businesses. A business credit card also caters to large corporations that are crafted to aid those people who are starting with their own business to grow while closely monitoring the baseline of credit.

Except having limits and low interest rate of interest, a credit card of businesses provides many solutions of replacement and many options of credit for small companies. A credit card of businesses also supplies at the large companies, which are brought to help these people who are starting with their own businesses to develop all in narrowly supervising the base line of the credit.

It really pays to go to the bank when one applies for a credit card to get the chance to answer all immediate inquiries. But since business credit card is for business people who are always on the go, many business credit card issuers offers online applications for business credit cards. When one applies for a business credit card, there is no need to visit the bank. There is also no need to wait in the queue just to talk to a bank representative. When you apply business credit card online, all you have to do is to select the business credit card option that would perfectly suit your small business or corporate credit requirements right from the comforts of your home or office.

Aside from offering safe, secured, and simple processes that are designed help you take care of your starting business, most business credit cards online offer accessible features for the convenience of the business credit card holder like the online payment and reporting. Customized company logos and access to instant cash are also available on line. Other business credit card online offers detailed reporting features for easy monitoring and access.

Although the value majority of offer of transmitters of credit card of businesses of large occupies itself, it is very important to seek initially what makes your needs for businesses. If your credit card of businesses is meant to invest in the inventory or right for the book of pay, it is significant to seek a flexible credit card of businesses, which can handle anything almost. If you choose outward journey directly at the bank or to request a credit card of businesses on line, a certain number of suppliers of credit card of businesses of minister are there to help you to find the product right of credit card so easy and convenient like possible.



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Stephen Bush asked:


A complicated business finance process can occur when an investor previously familiar only with residential real estate begins investing in commercial real estate investment property and business opportunity situations. Before a borrower attempts to buy a business, it is important to develop a business loan and commercial mortgage strategy.

There are many key differences between financing for commercial property investing and residential real estate investments. Because more residential property investors are exploring commercial real estate and business finance opportunities, this business opportunity financing and business loan report is designed to help educate new commercial investors about key commercial mortgage and commercial loan issues.

Rather than specifically focusing on issues that differentiate business financing from residential financing (which we have thoroughly analyzed in separate reports), this report will offer a few key observations regarding business finance elements that are often overlooked in new business investment considerations. These factors include credit card processing, business cash advance options and working capital management.

Coordinating Credit Card Processing and Business Cash Advance Programs -

Many business investments will involve the use of credit card processing decisions. These business activities should be analyzed simultaneously with business cash advance programs for several reasons. If done properly, a business should reduce their costs and improve their cash flow.

Reducing Credit Card Processing Costs in Business Investing -

One of the biggest benefits of coordinating credit card processing with a business cash advance program is the real potential that overall costs can be reduced. Such an advantage is likely to be available in conjunction with the most progressive programs by linking a low cost credit card processor with the best merchant cash advance program. Many of the best credit card processors will not be available for businesses other than through a high-quality credit card financing arrangement.

Improve Cash Flow for Business Investments -

Credit card factoring strategies can produce a business cash advance up to several hundred thousand dollars. For most businesses, this level of financing is not routinely available via other business finance programs. The decision to choose credit card financing to secure a merchant cash advance is an increasingly practical business financing response to business lenders eliminating line of credit programs.

It is important to realize that there are certain key limitations and potential difficulties with business cash advance strategies. New business owners will occasionally eliminate using a merchant cash advance without adequately considering the overall benefits because they are confused by this business finance approach. Although credit card factoring is frequently considered to be a short-term commercial financing strategy, there are also effective longer-term variations which should not be overlooked.

Working Capital Management Strategies -

Obtaining a working capital loan is usually more effective when arranged in conjunction with buying a business. However many lenders do not adequately address this issue in the early business finance stages. Before completing a purchase offer to buy a business, all business loan issues should be discussed in order to fully understand overall commercial financing choices and limitations.

After acquiring a business, it is more likely that business or personal collateral will be a necessity in getting working capital financing. One major exception to this common collateral requirement will be the use of a business cash advance and credit card factoring as mentioned above.

Additional Key Investment Business Finance and Real Estate Mortgage Issues -

As previously noted, commercial mortgage and commercial loan requirements are very different from residential financing requirements in the United States. Additional business finance reports include a discussion of many other significant financing factors. Other reports address important subjects such as business opportunity loans, business appraisals, stated income business loan options and SBA loan programs.

Most of the additional articles will provide further detail about topics discussed in this report as well as offering business financing solutions for numerous other complex business loan situations. For example, some SBA loan processes can include working capital as part of the total initial financing. For those interested in learning more about both potential advantages and problems associated with coordinating credit card processing and business cash advance services, there are several additional resources which will facilitate a better understanding of these complex business finance issues.



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John Leonetti, Esq., M.S. Finance, CM&A.A asked:


Most business owners believe that an ‘external’ sale of their business is their only (or at least best) Exit Alternative. Typically this is because business owners know that their employees and/or fellow family members don’t have the type of money required to secure a successful exit plan for them. So often times, business owners approach (view or see) the topic of Exiting a business as meaning that they need to sell their business to an outside buyer with enough money to pay them what they want.

So while an ‘external’ sale is intuitively appealing, it’s my experience that an understanding of ‘internal’ transfers will help open up a very good dialogue with a business owner so that they can understand all their options and make a well informed decision. In fact, analysis of an ‘internal’ transfer of the business can be a powerful alternative to a business owner looking for an Exit Strategy. And, depending upon the business owner’s motives, it may be the best alternative available.

‘Internal’ transfers of ownership in a business are often times overlooked because they are not intuitively understood by the business owner and/or the business owner’s advisors. So let’s examine some of the ‘internal’ transfer methods that are available to a business owner to illustrate the benefit of a well-conceived Exit Strategy.

‘Internal’ transfer methods include Employee Stock Ownership Plans (ESOP) Transfers, Management Buyouts (Sales to Family and Management), Gifting Strategies, Private Annuities, Family Limited Partnerships, and Charitable Transfer Strategies. The three (3) primary differences between these ‘internal’ transfer alternatives versus (and the) ‘external’ transfer alternatives are:



(i) the corporate assets, including future cash flows, are leveraged to achieve these strategies;

(ii) the driving force behind these ‘engineered’ strategies is a business owner’s motive of passing the business to someone other than an outside buyer, and;

(iii) the business owners will frequently be considering tax planning and estate planning along with their Exit Strategies. ‘Internal’ transfers, as a general rule, allow for more flexibility in these areas than ‘external’ transfers.



A business owner considering an ‘internal’ transfer can set the price and terms for the transfer and say to their family and/or management team, “Here is what I want/need for my business”. For this reason, ‘internal’ transfers are often referred to as ‘controlled’ transactions because the business owner is working with ‘assets’ that they already possess in structuring their Exit from the business. So if those ‘assets’ are sufficient to achieve that business owners’ goals (based on their motives), then it is worthwhile to examine an ‘internal’ transfer.

This is in sharp contrast to a business owner attempting an ‘external’ transfer because they are often subject to a process that includes outsiders investigating their potential investment in the ‘Target Company’ and then telling the business owners, “Here is what we are willing to give you for your business”. So, the Exiting business owner can expect to lose quite a bit of control over the process. And, because many business owners possess a unique psychological mix of independence, intelligence and control orientation, losing control to an outside buyer often leads to ‘choppiness’ in a deal.

Mergers and Acquisitions professionals will often advise business owners that if the business owner wants to set the price for the deal, then the outside buyer will be setting the terms for the deal. A deal is struck when each party is ‘equally happy’. Or, as one dealmaker said, every successful ‘external’ deal is a “little miracle”.

So, one will naturally ask, “What’s the downside of an ‘internal’ transfer versus an ‘external’ transfer”? Quite simply, negotiating with family members and key employees can be inherently dangerous. These individuals (and their advisors) will require detailed and confidential information from the business owner in order to fully understand all the risks inherent in owning the business – really no different than the ‘external’ buyer. And of course, most business owners are not anxious to share all their information with their employees; it goes against the nature of the relationship amongst workers and owners.

So then, how does one go about negotiating an ‘internal’ transfer? The answer is “very carefully”. And, the most cautious first step that a business owner can take is to engage an intermediary – which can be any one of the existing advisors to that business – to assist with the transaction. Having trusted advisors involved in the process raises the level of objectivity and lowers the level of emotions when negotiating the transfer.

Because, after all, if the ‘internal’ transfer does not work out, it will not add a lot of Value to the business to have [further] frustrated employees due to that business owner’s own doing. It’s easier to place blame for a failed transaction with a third party advisor so that all parties involved can amicably return to the business of running [and not transferring] the business.

Yet another downside to an ‘internal’ transfer is the loss of potential for extraordinary gain on the transfer. As a general rule, ‘external’ buyers for businesses include ‘Strategic’ (or industry) buyers and ‘Financial’ (such as Private Equity Groups) buyers.

A Strategic Buyer of a business stands to offer the selling business owner the highest total Value in buying the business because that buyer can apply ‘synergies’ to the valuation of the deal. In other words, a buyer who is already in the same business as the seller, can eliminate duplicate expenses and acquire new customers for their existing products. These ‘synergies’ help raise the Value of the transaction to the Industry buyer, and a good M&A intermediary will argue for the sharing of those synergies with the selling business owner. This synergistic value is likely not available with an ‘internal’ transfer.

So to summarize my original point, a business owner who wants to Exit their business should be aware of the various methods by which an Exit can be directed. Thereafter, consideration should be given to that business owner’s motives. In other words, what is most important to that Exiting business owner and how can it best be accomplished?

An Exit Strategy is defined as ‘The written goals for the succession of a businesses’ ownership and control, derived from a well thought out and properly timed plan that considers all factors, all interested parties, and the personal goals of the owners in a manner and time period that is accommodative to the business, its shareholders, and potential buyers.’ Accordingly, knowing the pros and cons of ‘internal’ and ‘external’ transfers is a critical step in establishing an Exit Strategy.

Exit Strategies are hard to design and even harder to properly execute. I am pleased that you are pursuing a pro-active interest in Exit Strategies because a pro-active approach to an Exit Strategy is the only approach to a successful Exit Strategy.

© 2007 John M. Leonetti



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Dave Kauppi asked:


If you’re a family business owner, chances are you’re thinking about what you’ll do when your working days are over. As William Rothwell, a professor at Penn State University, noted in the foreword to Exit Right: A Guided Tour of Succession Planning for Families in Business Together “More than 40% of the people who run the closely held operations that comprise 80% of the North American economy will retire by 2007.”

Even if you currently view the idea as unlikely, you are wise to consider the possibility of selling your material handling company. The decision to sell is all too often a reactive one rather than a proactive one — the primary reasons are a serious health issue, owner burnout, the death of a principal, general industry decline or the loss of a major customer. Advance planning can ensure that you exit your business from a position of strength, not from weakness due to necessity.

1. The biggest mistake business owners make is waiting too long to sell. Have you ever heard, “I sold my business to early?” Compare that with the number of times you’ve heard somebody say, “I should have sold my business two years ago.” Unfortunately, waiting too long is probably the single biggest factor in reducing the proceeds from the sale of a privately held business. The erosion in business value typically is most pronounced in that last year before exiting.

The decision to sell is often times a reactive decision rather than a proactive decision. An individual who spends 20 years running their business and controlling their outcomes often behaves differently in the exit from his business. The primary reasons for selling are events such as a serious health issue, owner burnout, the death of a principal, general industry decline, or the loss of a major customer.

Exit your business from a position of strength, not from the necessity of weakness. Don’t let that next big deal delay your sale. You can reward yourself for that transaction you project to close with an intelligently written sale agreement containing contingent payments in the future if that event occurs.

2. Figure out what you will do with your time after you are no longer working sixty hours per week. We all create business plans both formally and informally. We all plan for vacations. We plan our parties. We need to plan for the most important financial event of our lives, the sale of our business.

Typically a privately held business represents greater than 80% of the owner’s net worth. Start out with your plans of how you want to enjoy the rewards of your labor. Where do you want to travel? What hobbies have you been meaning to start? What volunteer work have you meant to do? Where do you want to live? What job would you do if money were not in issue? You need to mentally establish an identity for yourself outside of your business.

3. Get your business ready to sell. Now that you are all excited about the fun things you’ll do once you exit your business, it’s now time to focus on the things that you can do to maximize the value of your business upon sale. This topic is enough content for an entire article, however, we will briefly touch upon a couple of important points.

First, engage a professional CPA firm to do your books. Buyers fear risk. Audited or reviewed financial statements from a reputable accounting firm reduced the perception of risk. Do not expect the buyer to give you credit for something that does not appear in your books. If you find that a large percentage of your business comes from a very few customers, embark on a program immediately to reduced customer concentration. Buyers fear that when the owner exits the major customers are at risk of leaving as well.

Start to delegate management activities immediately and identify successors internally. If you have no one that fits that description and you have enough time, seek out, hire and train that individual that would stay on for the transition and beyond. Buyers want to keep key people that can continue the momentum of the business.

Analyze and identify the growth opportunities that are available to your business. Get rid of that outdated inventory. The buyer will not pay you for it anyway and it just clutters up the place.

4. When you are wearing all the hats already, trying to sell your company yourself can hurt your business. A major mistake business owners make in exiting their business is to focus their time and attention on selling the business as opposed to running the business. This occurs in large publicly traded companies with deep management teams as well as in private companies where management is largely in the hands of a single individual.

Many large companies that are in the throws of being acquired are guilty of losing focus on the day-to-day operations. In case after case these businesses suffer a significant competitive downturn. If the acquisition does not materialize, their business has suffered significant erosion in value.

For a privately held business the impact is even more acute. There simply is not enough time for the owner to wear the many hats of operating his business while embarking on a full-time job of selling his business. The owner wants the impending sale to be totally confidential until the very last minute.

If the owner attempts to sell the business himself, by default he has identified that his business is for sale. Competitors would love to have this information. Bankers get nervous. Employees get nervous. Customers get nervous. Suppliers get nervous. The owner has inadvertently created risk, a potential drop in business and a corresponding drop in the sale price of his business.

5. To maximize your selling price, you must get multiple buyers interested in buying your material handling business. The “typical” business sale transaction for a privately held business begins with either an unsolicited approach by a competitor or with a decision on the part of the owner to exit. If a competitor initiates the process, he typically isn’t interested in over paying for your business. In fact, just the opposite is true. He is trying to buy your business at a discount.

Outside of yourself there is no one in a better position to understand the value of your business more than a major competitor. He will try to keep the sales process limited to a negotiation of one. In our mergers and acquisitions practice the owner often approaches us after an unsolicited offer. What we have found is generally that unsolicited buyer is not the ultimate purchaser, or if he is, the final purchase price is, on average 20% higher than the original offer.

If the owner decides to exit and initiates the process, it usually begins with a communication with a trusted advisor - accountant, lawyer, banker, or financial advisor. Let’s say that the owner is considering selling his business and he tells his banker. The well- meaning banker says, “One of my other customers is also in your industry. Why don’t I provide you an introduction?” If the introduction results in a negotiation of one, it is unlikely that you will get the highest and best the market has to offer.

You may have spent your life’s work building your material handling business to provide you the income, wealth creation, and legacy that you had planned and hoped for. You prepared and were competitive and tireless in your approach. You have one final act in your business. Make that your final business success. Exit on purpose and do it from a position of strength and receive the highest and best deal the market has to offer.



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Luis Luarca asked:


As small business owner we need to understand the importance of accurate and timely accounting reports where we will need precise financial information to make the very important decisions we make as owners and managers.

Very often I meet small business owners who have put themselves into a pickle by not managing or paying attention to the valuable information provided in many accounting software packages.

Accounting operations to any business, small or large is like the fuel in your car. If you don’t have the right fuel or enough fuel in your car, you will not go very far.

Over the years I am still amazed at how many small business owners fail to see the value in managing the accounting process of their business. I was always puzzled at how small business owners could get away with running their business without even using Quicken or QuickBooks.

I figured it out. Most small businesses grow so fast that some of us don’t have the time to learn if not worry about the accounting side of the business. Why should we worry about accounting when we’ve got orders to fill, customers to make happy and vendors to manage?

Well, the importance of accounting not only lies in the requirement to file and pay the appropriate amount of taxes at the end of the year, but accounting also affords us valuable information in various report formats that allow us to make smart decisions in our small business.

These reports tell us many things about our small business that we would never think of and these reports also allow us to plan the future of our business as it relates to sales and expenses.

Sure some of us have CPAs or accountants that we give information to on a monthly or even yearly basis, where we should be calculating our sources and uses of cash flow everyday if not every week.

Sources and uses of cash is exactly what it says it is. It defines where are money is coming from (sales) and how are we using it (expenses). The reporting document that helps us determine this process is our Statement of Cash Flow. This report actually tells us in a summary format where our money came from and where it went.

Another very important report is the Income Statement report which tells us how much we sold, how much it cost us to sell what we sold, how much we spent to operate the business and finally our profit from all that work.

There are four pieces or elements of an income statement and they are; sales, costs of goods sold (COGS), expenses (fixed and variable) and income. Some small businesses will classify cost of sales (COS) rather than COGS. Costs of sales are for those businesses that really don’t have to purchase items in the raw material form and re-produce it to make it sellable.

For example, as owner of a consulting firm, we identify ours as COS where if we are a plumbing contractor or a manufacturer of wooden chairs, we would identify ours as COGS because we would have to buy plumbing material as well as wood and reproduce both to get a final product to sell.

The next report that is just as valuable as the previous two is the Balance Sheet report. This report tells us what our business is worth via a particular window of time. For example, I want to know what my business is worth today for the last month. The balance sheet would tell me what I own and what I owe.

This report basically has three really important pieces; Assets, Liabilities and Owners Equity. Each of these sections identifies exactly what it says.

Assets are those things the business deems worth something or those things we can get cash for in a pinch if we needed. This section is also the section banks and other lenders measure a business’ worth.

Machinery, inventory and sometimes your accounts receivables are considered assets. Yes, accounts receivables can be converted to cash via a bank loan, but I absolutely do not recommend this for any business. Although many businesses do borrow against their accounts receivable, I would never do it for any of my clients.

Liabilities are those things the business owes such as short-term loans, long-term loans, wages, taxes, etc. Banks measure this as plain old debt and it’s not good to have allot of it.

Finally, Owner’s Equity is that which is owed to people or groups of investors that pretty much have a right to be paid regardless of the success or failure of the business. It’s just that. We have to identify that other individuals or groups have actually invested into our business outside of a typical bank loan.

Is it OK to have both a bank loan and a particular amount of owner’s equity as a liability? Yes it is, as most businesses do. It is estimated that most business in the U.S. is 80% financed via a mix of both.

So great, now we know about a bunch of reports. These reports are available to you through any accounting software package you use, but you must be using an accounting software package because these reports come from the accounting process that puts the information in the appropriate accounts or sections that will eventually produce these reports.

For every sale there is a corresponding affect within the accounting process that will eventually compile data in one of the reports mentioned above and give you the right information to make a decision. Accounting operations allows us to see our successes and failures day to day, week to week and month over month. We need to review these reports often in order to stay in business.

I have seen quite a few businesses go out of business where when you ask the owners what happened, they will all say the same, “we ran out of money”.

Had those businesses paid a little more attention to the accounting process they might still be in business. Remember, accounting in your small business is like the fuel in your car.

There are many programs out there that will help you understand the basics of accounting where all you have to remember is that accounting functions off of a cause and effect principle.

Every transaction in your business must be recorded where that transaction is managed by an accounting software process that basically works behind the scenes. All you have to do is understand what is occurring.

For example; if I purchase $25.00 worth of office supplies I need to let the accounting software package know what accounts I want that transaction to affect. Another example would be if I sold $200.00 worth of products, I want the accounting side of the business know what I sold via what I purchased to sell.

This last example is a bit complicated and I will save the detail for another article where you should take away the idea that you first recorded the purchase of the raw material, produced something from it, inventoried it and finally sold it for $200.00.

Bottom line is that accounting operations is of paramount importance to your small business.

Often we rely on hiring individuals that say they know accounting but how do we know if those individuals know accounting when we aren’t too sure about it ourselves?

There are many programs available to us as small business owners where we can learn the basics of accounting. Sign up for a seminar or take a class at a local college or university. Your small business is just too valuable to not understand it.



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Stephen Bush asked:


There are several viable reasons to consider commercial property and business opportunity investment possibilities. The ability to finance a commercial mortgage or business loan via income provided by a business and commercial real estate is certainly a sound reason to explore business finance options. The realistic alternative to not include commercial property in the commercial loan should be viewed as a potential bonus for those concerned about property value trends.

The recent negative investment climate for residential real estate investment property has provided investors with new reasons to explore investing in business opportunity and business finance options. We will offer some candid advice about commercial mortgage and business financing as well as an overview about the importance of evaluating business and commercial investment property purchase possibilities.

Business Finance - Investing in Unique Businesses and Special Purpose Properties

Commercial real estate and business opportunity choices include special purpose situations such as funeral homes and golf courses. The unique characteristics of such business investment options translate to enhanced possibilities to differentiate a commercial business and provide added value.

Of course specialized business real estate investing does require special purpose business finance solutions such as golf course financing and funeral home financing. A critical requirement for business investment success is the ability to acquire a business loan that is appropriate for both the business and business owner.

Buy a Business with an SBA Loan for a Commercial Mortgage and Business Opportunity Finance

The option to use SBA financing (Small Business Administration loan) provides a business loan choice not available for residential real estate investing. This form of business financing is available to new business owners and can prove to be instrumental in purchasing a business opportunity or commercial real estate investment.

Business Opportunity Financing Without Real Estate Investment Property

Purchasing a business opportunity does not involve commercial real estate. The lack of a commercial mortgage can be an advantage if real estate values are decreasing because business value is dictated primarily by the business income rather than the real estate.

Business Loan - Commercial Investment Value Driven Primarily by Income

In comparison to residential real estate investment property value depending primarily on location, commercial real estate and business value is primarily determined by business income. This results in less sensitivity to local real estate property value trends. A business loan will require an appraisal evaluating business income, usually over several years.

Commercial Loan Precautions - Business Financing Problems to Avoid

Just as there are unique and substantial positive benefits associated with buying a business or commercial real estate investment property, there are also a number of special business loan and commercial mortgage problems to avoid when arranging business financing. For those most familiar with investing in residential real estate, it is important to note that there are over 25 differences between commercial financing and residential investment property financing. There is a critical commercial loan difficulty to anticipate with each difference.



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Robert M Clinger III asked:


Having performed business valuations for a variety of purposes, I have been asked a number of questions from clients. The following top ten business valuation questions have been compiled in an effort to briefly address some of the most frequent concerns clients have regarding a business appraisal.

1. What approaches do you consider in valuing the business?

Income Approach-The Income Approach derives an indication of value based on the sum of the present value of expected economic benefits associated with the company. Under the Income Approach, the appraiser may select a multi-period discounted future income method or a single period capitalization method.

Market Approach-The market approach derives an indication of value by comparing the company to other similar companies that have been sold in the past. Under the market approach, the appraiser may utilize the guideline publicly traded company method or the direct market data method.

Asset Approach-The Asset Approach adjusts a company’s assets and liabilities to their fair market values and adds to the value of intangible assets and any contingent liabilities.

2. What discounts may be applicable?

The discounts typically used in the valuation of a closely held business interest include a discount for lack of control, discount for lack of marketability, discount for lack of voting rights, blockage discount, portfolio discount, and key person discount. The most common discounts applied in business valuations are discounts for lack of control and discounts for lack of marketability.

3. What are the standards of value?

For most operating businesses, the standard of value will likely be fair market value, fair value, or investment value.

Fair Market Value is the price, expressed in terms of cash equivalents, at which property would change hands between a hypothetical willing and able buyer and a hypothetical willing and able seller, acting at arms length in an open and unrestricted market, when neither is under compulsion to buy or sell and when both have reasonable knowledge of the relevant fact.

Fair Value is a legal standard of value that has been established by the courts for use in issues ranging from marital dissolution to dissenting shareholder suits.

Investment Value is the value to a particular investor based on individual investment requirements and expectations. Investment value is typically used for transactional purposes when an acquirer is assessing the value of the target company, including the potential synergies of the deal.

4. What is the difference between an appraisal and a fairness opinion?

Full/formal business valuations typically consider all relevant approaches and methods that the appraiser considers appropriate in determining a value. These valuation reports typically include research on the subject company’s industry, economic conditions, trends, etc.

Fairness opinions provide the expert’s opinion of whether the proposed value of the transaction is “fair” for the shareholders. Fairness opinions do not typically provide an estimate of value or value range.

5. What are the main credentialing bodies for business valuation, what designations do they offer, and what designations have you earned?

The four main credentialing bodies in the business valuation profession are the National Association of Certified Valuation Analysts (NACVA), the Institute of Business Appraisers (IBA), the American Society of Appraisers (ASA), and the American Institute of Certified Public Accountants (AICPA).

NACVA offers the Certified Valuation Analyst (CVA) designation (for Certified Public Accountants only) and the Accredited Valuation Analyst (AVA) designation.

The IBA offers the Master Certified Business Appraiser (MCBA), the Certified Business Appraisers (CBA), Accredited by IBA (AIBA), Business Valuator Accredited for Litigation (BVAL), and Accredited in Business Appraisal Review (ABAR) designations.

The ASA offers the Accredited Member (AM), the Accredited Senior Appraiser (ASA), and the Fellow Accredited Senior Appraiser (FASA).

The AICPA offers the Accredited in Business Valuation (ABV) designation.

6. Why should a business have an annual valuation?

The most common benefits of an annual business valuation policy include:

Accountability and Performance-An annual business valuation enables the shareholders to see the value that is being consistently created or destroyed by the management of the firm.

Estate Planning Purposes-Many shareholders have on-going estate planning strategies aimed at protecting wealth for heirs.

Buy-sell situations-For those firms that do not have buy-sell agreements in place, annual business valuations are a good way of avoiding disputes that may arise when a shareholder seeks to sell his shares to the other shareholders.

Facilitate Banking-Many firms effectively utilize leverage to invest in value-creating projects. The ability of a firm to borrow based on the value of the goodwill or the value of the company’s shares may expand the universe of value-creating investment options available.

Expands the Investment Options-Closely held firms suffer from a lack of liquidity and the inability to use the company’s shares as currency when seeking acquisitions. An annual business valuation may enable the management of the company to use the shares as acquisition currency.

7. What is the difference between enterprise value and equity value?

Enterprise value is often referred to as the value of the invested capital of the business which includes the value of the equity and the value of the firm’s liabilities. This value represents the total funding of the asset side of the balance sheet for all fixed assets, cash, receivables, inventory, and the goodwill of the business. Equity Value is the enterprise value less all liabilities of the business and represents the value that has accrued to the shareholders through retained earnings, etc.

As various professionals may define these levels of value differently, it is important to understand exactly what a definition of a level of value includes or excludes under the specific circumstances.

8. Do you use rules of thumb when valuing the business?

Rules of thumb are simple pricing techniques that business brokers typically use to approximate the market value of a business. Rules of thumb typically come in the form of a percentage of revenues or a multiple of a level of earnings, such as seller’s discretionary cash flow. For example, a rule of thumb for pricing a widget manufacturer may be 40% of annual revenues plus inventory or two times seller’s discretionary earnings. Rules of thumb fail to consider the specific characteristics of a company as compared to the industry or other similar companies. In addition, rules of thumb do not reflect changes in economic, industry, or competitive factors over time.

Widely-accepted business appraisal theory and practice does not include specific methodology for rules of thumb in developing a value estimate. However, rules of thumb can be useful in testing the value conclusion arrived through the appraiser’s selected approaches and methods.

9. What role do court rulings have in developing an indication of value?

While Tax Court rulings may reflect the proclivity of certain courts to accept various discounts or levels of discounts in case-specific circumstances, these rulings may or may not play a role in the business appraiser’s analysis and value conclusion. The business appraiser must consider the relevant facts in the subject valuation and make a reasoned, informed decision regarding the discounts and level of discounts in developing an indication of value.

With respect to case law, business appraisers should be aware of general issues that may impact a valuation. Often times, the business appraiser consults the client’s legal counsel for their position on specific case law issues. Again, the business appraiser must use reasoned, informed judgment in developing an indication of value, considering the case-specific facts relevant to the valuation.

10. What are the main factors that impact the value of a business?

The value of a business interest is impacted by a number of factors, many of which may change from year to year, including:

• Financial performance-If a business has poor earnings capacity, the value of the business imay be negatively impacted.

• Growth prospects-Just as too high a rate of growth may lead to negative operational and financial consequences, too low a growth rate may also have a negative impact upon the business and its ability to achieve profitability. Revenue growth drives all opportunities for the business to expand.

• Competitive nature of industry-If the industry in which the business is operating has become more competitive due to the entrance of new competitors, the value of a business may be impacted as a result of lost market share, lower revenue growth, shrinking margins, and lower profitability.

• Management-Management of a business influences the value of the firm. A highly experienced management team and an organization with managerial depth is more highly valued by a willing buyer than an organization with only one manager or key executive.

• Economic and industry condition-The strength of the economy impacts all businesses in one way or another. If adverse economic conditions translate into long-term lower growth and profitability for a business, the value may be negatively impacted. Industry conditions are also impacted by the state of the economy but are also influenced by various other factors such as competition, technological change, trends, etc.



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Stephen Bush asked:


Before seeking an SBA (Small Business Administration) loan, borrowers should analyze several key business finance issues. This article will serve as an overview of the most important business loan and commercial real estate loan factors to assess before buying a business investment with an SBA loan in order to avoid numerous potential misunderstandings about a complicated business financing process.

Finalizing an SBA loan and refinancing a Small Business Administration loan are two of the most problematic commercial mortgage and business loan scenarios for business owners. There are practical business finance solutions for both of these common business investment problems.

Are SBA Loan and Business Finance Programs Difficult?

There are usually two schools of thought about getting a Small Business Administration loan to buy a business:

(1) Avoid this kind of commercial loan at all costs.

(2) Use such a business finance loan whenever possible.

These conflicting investment financing viewpoints are due to a commercial mortgage business loan process that is perceived as complex and difficult by many commercial borrowers.

In reality SBA loan programs are more practical than they often appear. It is critical to the success of a Small Business Administration loan program to be working with a business finance advisor and lender that is proficient at this difficult commercial mortgage and commercial loan process. There are many potential commercial financing problems to avoid when attempting to obtain a small business loans, and very few lenders are skilled in this business financing area.

Expecting Business Investing and Financing Difficulties: Business Loan Refinancing

One of the major investment drawbacks of an SBA loan has historically been the difficulty of refinancing the Small Business Administration business financing later. Current options have revised the situation and it is more feasible to arrange refinancing. It is still accurate to say that refinancing is not routinely available, but more importantly it is much easier to obtain than it was in prior years.

Advance commercial real estate loan and commercial loan planning can avoid some of the SBA loan refinancing problems. First and foremost, if the original business financing is arranged without a small business loan, this will make later business refinancing easier than if a Small Business Administration loan is involved. This means that commercial borrowers should at least consider if the initial business loan requires this form of commercial financing before proceeding.

Finalizing Small Business Financing: Two Common Commercial Loan Misunderstandings

One of the most frequent criticisms of an SBA loan program is the amount of paperwork required to complete the business loan and commercial mortgage process. What many commercial borrowers fail to understand is that any business financing process is likely to involve substantial paperwork and formal documentation requirements. In the end the key is working with a business finance advisor that understands what is required and can facilitate the submission procedures.

Beyond the paperwork concerns, a more critical and real problem is working with an SBA lender that is not very good at successfully completing Small Business Administration loan requirements. There are not many commercial lenders who are routinely effective at finishing this complex loan process with timely and successful results.

Alternatives to SBA Loan Financing - Conventional Real Estate Investment and Business Opportunity Loan Options

Conventional business finance options should always be considered simultaneously with the possibility of obtaining an SBA loan. As noted above, the feasibility of refinancing a business loan or commercial real estate loan in the future will depend heavily on the choices made by a commercial borrower when obtaining the initial commercial mortgage.

A conventional business loan or commercial mortgage might be more feasible than many borrowers realize. Refinancing is likely to be more successful if an experienced business finance lender and advisor are involved.



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barry jones asked:


Being a small business owner, you need to pay extra attention to management of financial resources. Since growth of your business somehow depends on its financial position, you should always be cautious about cash flaw within or outside your business. It is quite true that lack of finance can become a big problem in the way of the success of your small business. Since a sapling business face different kind of financial problems, any ordinary loan cannot meet these requirements. For that reason, the borrower needs to find out such a solution that may help small business owners in meeting different requirements of their small businesses. Small business loans are one of those business loans that are specially tailored to meet requirements of a sapling business organization. These loans can meet each and every financial requirement of a going business and can help that business in growing with a faster pace. Since market is crowded with various business loan schemes, every small business owner can manage to get the desired amount without any problem. Therefore if you own a new and small business organization and financial shortfall is bothering you, then these loans can prove to be the best help for you.

These small business loans are simple to get but for getting these loans, should have an approved business plan. This business plan must be working and should be approved from the national corporate body. For getting these loans, the borrower also need to estimate how much finance he or she will require for running his or her small business smoothly. Application for small business loans include purpose, amount and type of loan therefore, if you are looking for any such business loan, then evaluate these terms to get a suitable loan.

Usually, Small business loans are pledged against any high valued collateral but if in any case you are able to keep any asset as collateral against the loan amount, going for unsecured loans are the best option. However, a business loan requires good credit score for getting approval but if you are a bad credit borrower, then also you can arrange the desired cash with bad credit loans for small business. Usually, a typical business loan requires a written loan proposal and personal and financial details of the borrower. Since processing of these details consumes a lot of time, a business owner can go for online business loans.

In fact, online processing system helps the business owner in saving his or her precious time and allows him or her to redeem loan with a faster pace. With small business loans, the borrower needs to follow a monthly schedule of repayment; however, this schedule can be chosen as per his or her monthly business revenue flow. This facility helps the business owner in achieving his or monthly target without bothering for arrangement of funds and supports the business to grow with faster pace. Therefore if your business is suffering due to the unavailability of funds, then these loans can prove to be the help for you and your business.



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James Copper asked:


Business finance is one of the most important aspects of running and maintaining a business. Finances dictate the success or failure of a business. If a business owner does not properly maintain their business finances then they will soon see problems arise. Business finance is something that every business owner must deal with and understand.

Part of business finance is setting up proper cash flow. A business owner needs to clearly define their accounts receivable and accounts payable. They need to maintain a steady and balanced cash flow at all times. This means they must never let your accounts payable exceed their accounts receivable in any given month.

A business owner must also carefully manage their debt. They should never let their debt get too high or out of control. They should maintain regular payment schedules to ensure they do not fall behind on repaying any debt.

Keeping clear and concise records is extremely important to keeping business finance under control. A business owner should either hire a professional or use some type of bookkeeping computer software to maintain accounting records.

It is important for a business owner to maintain a business budget, much like they would for their household. This will help them ensure they are keeping track of all the money coming in and going out of the business. This is a good method to avoid getting too much debt.

Proper record keeping can also help out should the business owner need to get a loan. Lenders prefer to have records to refer to when making a decision on a loan, especially for a business. Businesses are seen as risky because they can easily fail. Lenders like to see proof that they business is doing well or at least a forecast that shows significant proof the business will do well. This is what good record keeping does.

Business finance is something many people do not think too much about when starting a business. This is why so many businesses fail. When a business is just starting up lenders like to see a good business plan in place, including a financial plan. This shows the business owner is really understanding all that is involved with taking a business successful.

Every business owner should have their business finances in mind at all times. Money is the biggest indicator of success in business, so it makes sense for that to be one of the top priorities of a business owner. For proper business finance a business owner should maintain records for all of the money going in and coming out of the business. They should track all debts and money owed to the business, as well. By practicing good business finance, a business owner is going to be one step closer to ensuring their business succeeds.



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