When it comes time to sell a small business, how can you value its worth? This section discusses several common valuation techniques.
- A friend of mine once asked me to help him as he…negotiated to buy a small business.…- Who was it, do I know?…- Yeah, you know who it is, but let's have some respect…for privacy here.…Let's just say that it was a friend.…- Okay, so what did this friend ask you to do?…- He asked me to help him figure out how much…to pay for the purchase of a small, family business.…- Okay, very good.…An important part, maybe the most important part,…of any business acquisition is the negotiation…of the purchase price.…- I told my friend to get the financial statements…of the target business and he and I would…look at them together.…- So your friend was thinking of buying…a small family business?…- Yes, yes.…
- Ah, I think I can already predict what's going to happen…next in this story.…- Well, let's see if your prediction is correct.…He brought the financial statements to my office…and it didn't take me long to realize that the small…business financial statements were worthless.…- Ah, typical.…I'll bet that the current owners of this small family…
- Summarize the two forecasting techniques used to create a complete business plan.
- Analyze the five methods for maintaining financial records for a company and explain what kind of company would require each method.
- Calculate payroll expenses with accuracy.
- Apply the entity concept to hypothetical situations.
- Describe the process for obtaining financing from third-party sources.
- Explain the process for valuing a company.