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The value of a business is usually based on earnings rather tangible assets. On the other hand, depending upon the type of tangible assets a company owns, a buyer may be willing to pay more because in a worst-case scenario, they can always dissolve the company and sell off the assets to recover their investment.

Three Approaches to Valuing a Business

There are three standard methods of business appraisal valuation. The first is known as the Asset Based Approach, which determines the value of a business based on the costs to replace the tangible assets. If the earnings can not support a value greater than the assets, then at best, the value of a business is equal to the value of its tangible assets.

The Market Approach determines the value of a business using ratios or factors based on the earnings, sales and/or assets of past transactions of similar businesses. These ratios or factors are then applied to the subject company’s sales, earnings and/or assets to derive an indication of value. If the business being valued is not average, then this approach will not properly determine an accurate value.

The Income Approach determines the value by converting earnings into a value using a capitalization rate, discount rate or multiple. There are several Income Approach methods that appraisers often use to develop indications of value, each of which requires some level of earnings and a conversion factor to convert the earnings into a value. Properly matching the selected level of earnings (pretax, after-tax, discretionary or some form of cash flow) with the correct conversion factor (cap rate, discount rate or multiplier) is critical to obtaining a reasonable and realistic value. If executed correctly, each of these methods should produce roughly similar values.

An Example Formula to Determine Business Value

Here is one Income Approach method often used by business brokers and appraisers to determine the value of a business. It is known as the Multiple of Discretionary Earnings method; a two-step process.

First, you must determine the discretionary earnings that are likely to take place in the near future. This can be determined either by averaging the last several years earnings, or if your most recent year is indicative of what you expect to be on-going, then you can use the past year’s discretionary earnings. “Discretionary earnings” is defined as reported pretax earnings, plus your salary, interest expense, depreciation and any personal expenses run through the business.

The next step is to chose a multiplier. The range of multipliers applicable to this level of earnings is 0 to 3. The majority of small businesses sell in the range of 1.5 to 2.5 times the discretionary earnings. The resulting value includes all the tangible assets needed to operate the business such as the fixtures, furniture, equipment and inventory. Additional value that you can keep or sell is the net liquid assets (cash, accounts receivable less payables) and non-operating assets owned by the business such as your personal car. Thus, if a business produces discretionary earnings of $150,000 and the business is considered average, then 1.5 times $150,000 = $225,000 plus the value of the net liquid assets.

Seek Professional Help

As you can clearly see, properly determining value of a business is a challenging and complex process. There are professional business appraisers who handle these types of transactions on a day to day basis, and I strongly suggest you invest in a professional business appraiser to assist you in properly determining a value for a business, whether you’re buying or selling.

Every person has bought at least one product that didn’t do what the advertising said that it did. That’s what we get for watching late night infomercials. If you want your online business to be around in three years, build relationships through integrity.

Integrity

It’s a word that some business owners know nothing about. They would promote any product or service to get a quick buck. What happens after the customer pays their money is immaterial to them. Their websites pop up one week and disappear when the heat gets to be too much, only to resurface under another name.

There is a reason for that. They know what people are looking for, but instead of trying to provide it, they exploit it for the money.

Integrity in business means keeping your promise. It may not seem like it, but readers scrutinize website businesses. It could be because there is no physical body to put with the company that the eyes watch a little closer. The result is the same though: if you don’t come through you will lose readers and sales.

One area where readers learn to mistrust is use of their personal information. If they opt-in for an email newsletter, don’t sell their names to mailing lists and by all means, don’t spam them. This is not the way to get what you want from your readers.

Test, Test, Test

Are you selling products on your website? There are a lot of variables with that especially if it is a physical product. Before you offer a new product, always test market to see if it is going to garner a demand. No market means… no money.

With digital products testing comes in the form of knowing that the advice inside will work for the person buying it. If you sell an eBook about how to set up your own affiliate program in one day (example only) then every customer should be able to duplicate your process.

The same goes with affiliate marketing. Only upsell affiliate products or services that you know are legitimate and deliver what is promised. What is the money going to help if your online reputation is shot?

Truthful Content

Before readers become customers, they will visit your site over and over. They are reading your content. Be sure that everything you write is truthful and unique. There is enough bad information floating around and you can’t build a relationship of trust on false information.

You don’t have to make big boasts to get readers to keep reading, just make good on what you do offer them. This builds a relationship of trust that can benefit you and your readers for years to come.

Establishing an online presence can be an expensive task, so it’s understandable to look for opportunities to reduce expenses. One way that many people have found is to design their own website instead of paying a web designer or web design company. That may be the right approach for you, or it could end up costing you more in the long run. The only way to know for sure is to weigh the pros and cons of do-it-yourself web design vs. hiring a professional.

Before you even get into any of the technical details, you need to know how much your time is worth so that you can determine whether your time spent designing your own website is actually saving you money or simply taking you away from making money.

Armed with that knowledge, your next step is to evaluate your level of technical skill on a computer, specifically, as it relates to web design. Do the terms HTML, CSS, domain, e-commerce, FTP or SSL mean anything to you? If your answer was yes, then designing your own website may be an option, though it’s a good idea to work from a web design checklist to make sure you don’t miss anything. However, if your answer was no, you should either be prepared to invest several weeks just learning the basics, or consider hiring a professional.

If you’re still marching bravely forward, congratulations! Now ask yourself if you can afford:

1. To take time away from your you day to day operations to learn the skills that you’ll you need to design your own website?
2. Not to have an online presence while you’re learning how to design your own website?

From the basics to more advanced techniques, w3schools is loaded with tutorials, but keep in mind that HTML, CSS and Javascript are just the beginning. If you need advanced functionality such as e-commerce, a content management system or a forum or blog, you will need to understand programming languages like PHP or ASP as well. If you don’t have a technical background, the learning curve will be steep.

Another thing to consider is the software that you’ll need to design your website. First you’ll need an image editing program like Adobe Photoshop, but since you want to save money, its $700 price tag may be a bit steep for you. There are alternatives though, such as GIMP or Photoscape which are free but not as powerful. Next, you’ll need a program to edit your HTML and CSS files. Adobe Dreamweaver will give you the most functionality and is usually the easiest to learn since it works a lot like some of the software you’re already familiar with, but it will set you back about $400. If you’re trying to keep your costs to a minimum, there are a few bargain-minded programs available, like CoffeeCup that don’t have all the bells and whistles. Lastly, you will need an FTP program to upload your files to your web server. CuteFTP and SmartFTP are both very effective and inexpensive, and FileZilla is available for free, but is missing a few key features that the other two have.

Now that you know what goes into designing your own website, you can make a more informed decision whether it’s right for you or not.

Some people are natural showmen. They love telling a story and have no problem getting up in front of a crowd to enthrall others by telling it. Others are naturally shy or fearful just because of the occasion or a personality attribute. Some of the world’s finest actors have such fear of performing, they’re nearly paralyzed by the thought. But, they have learned techniques to overcome it to let them perform at their peak.

Because those techniques are learned, you can learn them too.

Fear of looking foolish is one of the most basic, and most common, reasons that public speaking creates shyness or fear. No one wants to look incompetent in front of a group of people. But recognizing that the fear exists and is perfectly natural is the first step to overcoming it.

Start by practicing in the mirror. Note any awkward gestures, look for any portions of the speech where you find the phrases hard to say. Smooth them out by re-working them. Make it as easy on yourself as possible.

Then practice in front of one or two trusted friends or loved ones. Knowing that you have a forgiving audience will give you a little breathing room at the same time as you build confidence. It also gives you a chance to practice your speech until you know it cold. That way, you don’t have to worry about not being prepared. That’s another confidence builder.

In addition to providing practice in front of a forgiving audience, giving your speech to one or two others in advance let’s you spot any sections that are dull. Keep an eye on your audience. If you can’t interest friends in what you have to say, you probably aren’t going to thrill a room of strangers.

But choose that practice audience well. If you’re giving a speech on the politics of Zimbabwe to a busy mom with a two year old, she may be distracted for reasons having nothing to do with your talk. Don’t underestimate your audience, either, though. All kinds of people are interested in all kinds of things, if they’re discussed in an interesting way.

Having a solid speech helps. But practice delivering it in an interesting way as well. People relax when you are relaxed. Sometimes, you just have to fake it, at least at the beginning. Usually, once you get started the fear will disappear.

How?

Because by continuing on through the fear, you are focusing on the speech, not your nervousness. You can only hold so much in your mind at once. Turning your attention outward – to the audience, to the topic, to the event – keeps it from being turned inward on your uncomfortable feelings. Dwelling on the fear tends to increase it. Speaking through it tends to dissipate shyness.

Experience will help. The first speech you give may not be your best. But over time, by using these techniques, you will develop skill at public speaking. Before long, you’ll be an old pro.

It seems like just about everyone has a blog these days: students, moms, churches. So where is yours? Businesses can really benefit from a blog that goes along with their website.

Business websites are for conducting business. You use the pages to tell potential customers about what you do. They can find out all they want to know about hiring a gardener, choosing flowers, buying seeds and landscaping their dream garden if that is where your business is at. What they don’t usually find out about is your life.

When you read online, you can connect with a website through the words of their content. Depending on the type of “voice”, you’ll want to read more. Readers may even want to know what is behind your passion for the sort of business that you have created. They won’t find that on a website.

And, words can sometimes be deceiving. People can promise a lot but not deliver. It can be hard to trust a voice coming through words on a screen without a face or any other information to go with it.

Blogs came into creation as online journals. They still are in a way. A blog is less business-like and more personal. Personal is what your readers will want from you. On a blog, they can meet you on another level that will help them to appreciate you even more on a business level.

This doesn’t mean that you have to spill all your dirty secrets for them to get to know you. It is about building relationships that will last. So, in the interest of that, you can be the first to extend the olive branch.

Blogs are great because readers and customers can interact with you each time you post. They can sign in and give great feedback every day if they want.

Your posts don’t have to be very formal. Start by introducing yourself and talking about your road to the online business world. It is an opener that could be just enough to draw your readers in.

When readers leave feedback they are responding to posts. Will you leave it at that? Communication is a two-way street. Answer their comments as often as you can – which needs to be more often than not. Carry on a conversation with the people who are willing to give you a chance.

Blogging for business is a useful tool for building relationships with readers and customers. It gives them a chance to see you as a real person just like them and not just a name who wants their sale.