In our experience, the risks associated with business purchases fall into three categories:
In this blog we’re focusing on the third risk category, the value exchange, and how you can manage that risk.
Topics: Business Value, Buying a business, Business maintainable earnings, risk management
There are some common 'people-related' risks associated with business purchases, particularly in small to middle-sized businesses that are substantially dependent on an owner or a few senior employees for their success.
Two things can happen if those personnel aren’t retained in the business in an active way:
Topics: Buying a business, Business transfer, staff management, Business maintainable earnings, business management, human resources
Business valuation is not an exact science and nor is it a simple science. However there are some factors that should always be considered when assessing a business’ value.
They are:
We've created the following infographic to help you get started on assessing the value of a potential purchase opportunity.
Topics: Business Value, BME, infographic, Business valuation, Business maintainable earnings, COVID-19, coronavirus
Business Maintainable Earnings (also known as 'Future Maintainable Earnings') reflect the ability of a business to generate earnings into the future.
BME is one of the most important concepts the market will consider when assessing business value – it is particularly critical for determining a business' going-concern value, including the value of goodwill.
The following infographic shows how to take account of abnormal fluctuations in your business’ performance (i.e. normalise) when calculating your BME.
Topics: Business Value, BME, infographic, Business valuation, Business maintainable earnings, valuing a business
Business valuation is not an exact science and nor is it a simple science. However there are some factors you should always consider when assessing a business’ value.
The following video lists 3 key factors to consider when valuing a business and 3 questions you need to ask to uncover this important information.
Topics: Business Value, BME, Video, Business valuation, Business maintainable earnings, business value drivers
When determining what a small to mid-sized business is worth, Business Maintainable Earnings (BME) is one of the key concepts the market will consider.
BME reflects the ability of a business to generate earnings into the future.
Remember, as a buyer you don’t want to pay for opportunity you will create in the future; unless there is a strategic element to the purchase, ideally you only want to pay for what has been built up by the vendor.
Topics: Business Value, Buying a business, BME, infographic, Business valuation, Business maintainable earnings, business valuer
Goodwill is an intangible value associated with a business.
As we have explained in other eBooks and blogs, stock, plant and equipment, and other fixed assets, are tangible items that can be relatively easily valued on a market.
Goodwill is intangible; essentially it is the risk premium around how and what business maintainable earnings (BME) will be delivered into the future if the business is acquired by someone else and run in basically the same way.
Topics: Business Value, Buying a business, Selling your business, BME, Due diligence, Exiting your business, strategic value, selling a business, Business maintainable earnings, goodwill
Business valuation is not an exact science and nor is it a simple science. However there are some factors you should always consider when assessing a business’ value.
The following video lists 3 key factors to consider when valuing a business and 3 questions you need to ask to uncover this important information.
Topics: Business Value, BME, Video, Business valuation, Business maintainable earnings
Business purchasers want to know: If I buy a business today, how long will it take me to get my money back?
Remember, the purchaser doesn’t want to pay for opportunity that they create in the future. They only want to pay for what has been built up by the vendor.
In the small- to medium-sized business market, purchasers are generally looking from one, to four and a half years, to recover the money they’ve invested.
Topics: Valuations, Business valuation, Business maintainable earnings, valuing a business, multiple of earnings
When determining what a small to mid-sized business is worth, Business Maintainable Earnings (BME) is one of the key concepts the market will consider.
BME reflects the ability of a business to generate earnings into the future.
Remember, as a buyer you don’t want to pay for opportunity you will create in the future; unless there is a strategic element to the purchase, ideally you only want to pay for what has been built up by the vendor.
Topics: Business Value, Buying a business, BME, Business valuation, Business maintainable earnings
