Do Business Well

ASSET VALUE

For most companies the asset value should represent the lowest amount below which the owner might just as well liquidate. There are only two differences between asset value and liquidation value. In calculating asset value you don’t have the costs of liquidation and you can be more generous in appraising certain assets than you might be if you had to liquidate.

INDUSTRY STANDARD VALUE

It’s common in many industries to have a valuation method. Travel agencies are generally valued at ten times annual commission. Manufacturers’ reps, on the other hand, are generally only worth one year’s commission. Magazines use a certain number of dollars per subscriber. Manufacturers might expect to get between two and ten times annual earnings. Continue Reading »

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There are many situations that may cause you to seriously consider selling out. Among these are the obvious such as age, ill health, a decision to move your family to a new area, burnout, family pressure, or just the desire to move on to something new.

When selling becomes a serious option, you need at least nine months to find a buyer and consummate the sale. For even better results, plan to take two years. Here are the steps you should follow to obtain the highest price for your enterprise.

1. Change the way you do your bookkeeping one to two years before the sale. There are many different ways to prepare your income and financial statements that are legal and ethical. When selling the business is not a consideration, your priorities are probably determined by taxes or banks. You’re either trying to limit your profits to reduce tax exposure or maximize profits to prove creditworthiness.

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It is not at all unusual for newcomers to franchising to go into a state of shock when they first realise the complexity of a typical franchise t agreement. But whilst efforts to draft franchise agreements in plain English, thereby enhancing their user-friendliness, are laudable, attempts to keep them “short and sweet” are generally doomed to failure. The reason for this is that unlike other legal agreements that will deal with one specific transaction, a franchise agreement has to cover an entire portfolio of commercial arrangements of varying complexity that may appear to be almost unrelated, yet, by virtue of the fact that they are part of one specific franchise arrangement, they are in fact closely intertwined.

To illustrate this point, let us look at just one of the areas that are dealt with in a typical franchise agreement, namely the grant of the franchise.

The Grant

A franchise is granted, never sold. Typically, franchisees will be licensed to operate one unit of the franchise, either at a specific address or within a clearly defined territory, using the system’s brand name(s) and corporate mage, sometimes known as the get-up, as well as its know-how as described in the franchise agreement and the operations and procedures manual. Continue Reading »

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