How A Merger Can Benefit Your Business

After all the blood and sweat that went into making your business grow, you may not appreciate the idea of a merger. However, they can sometimes prove the best thing for your company. You will need an evaluation to determine whether you want to make this choice, but if that does end up the case, we’ve listed some ways a merger can benefit your business.

Cost of business:

If your business merges with one on a bigger scale, you can lower your business costs (due to economics of scale). For instance, you might get better bulk buying options or access to fixed costs.

Less competition:

If you have experienced losses due to multinational competition, you will end up better equipped to deal with them after a merger.

Keep an industry from closing:

If a whole industry has experienced a decline, a merger can save companies from going under.

 

If you want to reap any of these benefits for your business, Venture Opportunities Inc. can help you with your merger. We also offer many other business services. To find out more, give us a call at (972) 783-1662.

Small Business FAQ

If you’ve got a small business, you may experience struggle trying to keep up with all the daily tasks alongside big picture trends. Running a business always proves a tough venture, but well worth it in the end when you pull it off. To help make this whole process a little easier, we’ve put together a few small business FAQs:

I want to sell my business, how do I determine its worth?

While “how to” guides do exist out there, you don’t wan’t to risk getting taken advantage of on your business. Higher a professional to perform a business valuation to make sure you don’t overshoot or undershoot its worth.

What does DBA stand for?

DBA stands for “Doing Business As…” In more states, they require that businesses whose name does not reflect the owner’s file for a DBA.

How do I find minimum wage information for where I do business?

If you want to find out this information, go to the Department of Labor site. There, you can find the laws for your state.

 

Hopefully these FAQs answered a question or two you might have had. If you should require any of a host of business services ranging from valuations to mergers, give Venture Opportunities, Inc. a call. For more information, you can reach us at (972) 783-1662.

Why Buy A Franchise?

You’ve saved up money and experience; you feel ready to own a business. Starting from the ground up can prove very difficult, and also lessen your chances of success. On the other hand, you could invest in a franchise. We’ve presented some information about why a franchise could fit your needs:

Pre-made business plan:

Your franchise will already have a way of doing business; you will have access to the efficacy of the results in the required disclosures made available to you.

Existing brand-name:

Much of the marketing work will have already gotten done for you. Your franchise will have already built a brand across the state or even the country.

Training:

Most franchise companies will train you to help you start out smoothly. Operational support will also remain available for any questions you may have after you get the business up and running.

Low risk:

This factor makes franchises such a tempting option; the risk of your franchise business not taking off doesn’t even touch what it would reach if you started your own business. You’ll still have to work hard, but you’ll have much more confidence that it will end up for something worthwhile.

 

Has this sparked your interest in buying a franchise? Venture Opportunities Inc. can help; we can help you get your franchise, and also offer many other business services. For more information, don’t hesitate to give us a call at (972) 783-1662.

Two Similar Companies ~ Big Difference in Value

Consider two different companies in virtually the same industry. Both companies have an EBITDA of $6 million – but, they have very different valuations. One is valued at five times EBITDA, pricing it at $30 million. The other is valued at seven times EBITDA, making it $42 million. What’s the difference?

One can look at the usual checklist for the answer, such as:

  • The Market
  • Management/Employees
  • Uniqueness/Proprietary
  • Systems/Controls
  • Revenue Size
  • Profitability
  • Regional/Global Distribution
  • Capital Equipment Requirements
  • Intangibles (brand/patents/etc.)
  • Growth Rate

There is the key, at the very end of the checklist – the growth rate. This value driver is a major consideration when buyers are considering value. For example, the seven times EBITDA company has a growth rate of 50 percent, while the five times EBITDA company has a growth rate of only 12 percent. In order to arrive at the real growth story, some important questions need to be answered. For example:

  • Are the company’s projections believable?
  • Where is the growth coming from?
  • What services/products are creating the growth?
  • Where are the customers coming from to support the projected growth – and why?
  • Are there long-term contracts in place?
  • How reliable are the contracts/orders?

The difference in value usually lies somewhere in the company’s growth rate!

© Copyright 2015 Business Brokerage Press, Inc.

Photo Credit: jeltovski via morgueFile

Two Similar Companies ~ Big Difference in Value

Consider two different companies in virtually the same industry. Both companies have an EBITDA of $6 million – but, they have very different valuations. One is valued at five times EBITDA, pricing it at $30 million. The other is valued at seven times EBITDA, making it $42 million. What’s the difference?

One can look at the usual checklist for the answer, such as:

  • The Market
  • Management/Employees
  • Uniqueness/Proprietary
  • Systems/Controls
  • Revenue Size
  • Profitability
  • Regional/Global Distribution
  • Capital Equipment Requirements
  • Intangibles (brand/patents/etc.)
  • Growth Rate

There is the key, at the very end of the checklist – the growth rate. This value driver is a major consideration when buyers are considering value. For example, the seven times EBITDA company has a growth rate of 50 percent, while the five times EBITDA company has a growth rate of only 12 percent. In order to arrive at the real growth story, some important questions need to be answered. For example:

  • Are the company’s projections believable?
  • Where is the growth coming from?
  • What services/products are creating the growth?
  • Where are the customers coming from to support the projected growth – and why?
  • Are there long-term contracts in place?
  • How reliable are the contracts/orders?

The difference in value usually lies somewhere in the company’s growth rate!

© Copyright 2015 Business Brokerage Press, Inc.

Photo Credit: jeltovski via morgueFile

Importance of a Business Valuation

How exactly is someone supposed to know how much their company is worth? Net gain, assets, profitability? Actually, every little aspect needs to be taken into account when assessing your business’ value. That’s where business valuations come in. These are done by professional, precise, and meticulous business veterans to get as accurate an appraisal on your business as possible.

Many business owners under-sell their businesses, sometimes by a lot; this is just throwing away cash. With a proper business valuation, this won’t happen. There are other uses for business valuations too; they help with estate planning, business planning, and divorce proceedings as well.

There are 4 major types of business valuations that we offer, based on the size of the sales in the business:

  • Express Valuation: Sales of $0-500k – This produces a valuation anywhere from 7-25 pages. It comes with a cover page that briefly outlines the purpose and conclusion.
  • General Valuation: Sales of $500k-1M – This produces about 45 pages of valuation. Generally small main-street businesses utilize this option.
  • Formal Business Valuation: Sales of $1M-5M – This is a limited scope valuation that covers income statement, balance sheet, comparable transactions, economic outlook, etc.
  • Mergers and Acquisition Valuation: Sales of $5M+ – This valuation offers a complete overview and breakdown of your business; it’s for companies with high projected growth potential.

Here at Venture Opportunities INC, we offer business valuations alongside a host of other services. For more information, please give us a call at (972) 783-1662.

Importance of a “Letter of Intent”

What is a letter of intent (sometimes called a term sheet)? Basically, it’s the precursor to a legal contract: a two to four page overview of the agreement between a buyer and seller of a business. It lays out all the terms of the transaction, such as purchase price, how that will be paid, assets sold, terms of non-compete agreement, etc.

Letters of intent are not binding agreements, those are made afterwards. They do have some very important benefits, however; when you hash out all the agreements before hiring your lawyers, you can save a fortune on legal fees. With all the grunt work done beforehand, lawyers can usually print up a sale document on the first or second draft. If you skip the letter of intent, the whole of your business arrangement and its conversion into legal language will be money in the lawyer’s pocket from both sides. 

 

Here at Venture Opportunities INC, we’re happy to help you with all of your business-related needs: buying, selling, mergers and acquisitions, valuations, etc.  For more information, please give us a call at (972) 783-1662.

3 Preparations for Selling Your Business

Are you considering selling your business? Check out these three tips on preparations for selling your business. And remember, you can always contact us at Venture Opportunities Inc for assistance.

1- At Least 2 Years of Profitability:

You will generally need to show at least two years of tax returns that prove your company is in the black. This is the most direct route to enticing a potential buyer with the value of your company. A couple of years of preparation are necessary to ensure maximum profitability; this shouldn’t be a last minute endeavor.

2- Make Sure your company is at its Peak:

Don’t hold onto your company until it is on the decline; growing companies will receive higher offers than companies that have become stagnant. Selling a company at the height of its success ensures the biggest payback. While you may be making more money from your company at its peak, that money comes out of your potential net worth if you wait too long.

3- Make Sure the Market is Right:

Market fluctuations have a huge influence on the value of a company. Researching market conditions is absolutely necessary to getting the highest offer possible and avoiding toxic dips in an industries worth.

When you get ready to sell your business, consider these three tips before you do so. And be sure to consult Venture Opportunities for assistance.

Three Basic Factors of Earnings

Two businesses for sale could report the same numeric value for “earnings” and yet be far from equal. Three factors of earnings are listed below that tell more about the earnings than just the number.

1. Quality of earnings
Quality of earnings measures whether the earnings are padded with a lot of “add backs” or one-time events, such as a sale of real estate, resulting in an earnings figure which does not accurately reflect the true earning power of the company’s operations. It is not unusual for companies to have “some” non-recurring expenses every year, whether for a new roof on the plant, a hefty lawsuit, a write-down of inventory, etc. Beware of the business appraiser that restructures the earnings without “any” allowances for extraordinary items.

2. Sustainability of earnings after the acquisition
The key question a buyer often considers is whether he or she is acquiring a company at the apex of its business cycle or if the earnings will continue to grow at the previous rate.

3. Verification of information
The concern for the buyer is whether the information is accurate, timely, and relatively unbiased. Has the company allowed for possible product returns or allowed for uncollectable receivables? Is the seller above-board, or are there skeletons in the closet?

Three Basic Factors of Earnings

Two businesses for sale could report the same numeric value for “earnings” and yet be far from equal. Three factors of earnings are listed below that tell more about the earnings than just the number.

1. Quality of earnings
Quality of earnings measures whether the earnings are padded with a lot of “add backs” or one-time events, such as a sale of real estate, resulting in an earnings figure which does not accurately reflect the true earning power of the company’s operations. It is not unusual for companies to have “some” non-recurring expenses every year, whether for a new roof on the plant, a hefty lawsuit, a write-down of inventory, etc. Beware of the business appraiser that restructures the earnings without “any” allowances for extraordinary items.

2. Sustainability of earnings after the acquisition
The key question a buyer often considers is whether he or she is acquiring a company at the apex of its business cycle or if the earnings will continue to grow at the previous rate.

3. Verification of information
The concern for the buyer is whether the information is accurate, timely, and relatively unbiased. Has the company allowed for possible product returns or allowed for uncollectable receivables? Is the seller above-board, or are there skeletons in the closet?