Economic Downturn?

Despite the negative news we hear everyday on Bloomberg or Fox News, there are many businesses in Southwest Florida doing just fine. One way is that many business owners decided to stay small enough to succeed. They didn't get greedy in the good times and over leverage to capture "potential" markets that as it turned out never materialized. They have the flexibility to change with the times and conditions much better than the large corporations, with their "legacy" costs and unmanageable chains of command. Are you listening Lee BOCC? While some have had to give up some of their space or employees, others have seen opportunity to serve needs and worked to fill them. Some have bought out struggling competitors to add needed accounts and usable equipment. Some have added profit centers that enhance the core business, while others have eliminated non productive lines or srvices to concentrate on the core business. Naturally, being good at what you do and maintaining a good reputation will maintain many a business through what might be the end of the line for those that don't.

Evaluation or Valuation?

Evaluation or Valuation?
I am often asked to evaluate a business when what is really wanted is to value a business. What is wanted is to know is what the business is worth. To determine the value of a business is a valuation. It takes skill and a variety of input as described in an earlier post to do a professional valuation. It is easy to understand the confusion because I have even seen broker advertise business evaluation as a service. An evaluation is a simple assessment of how your business is doing, which doesn't take a professional. Your customers do it for you every day. Their reaction to your product and services will give you a good idea of what you are doing right and what you can improve upon. While these evaluations are free, they are valuable. They will determine if your business will grow and succeed, which is the reason we are all in business. Of course, a successful and profitable business will have more value than another when it comes time to do a valuation.

Larry Steinborn, Broker
Business Depot
239-43-1343

www.twitter.com/bizdepot

What is my business worth?

To really know what your business is worth takes time and skill. Each business is unique and may have positive and negative factors that add or subtract from the value that a buyer is willing to pay. A current issue that needs to be considered if the business is to be financed is the availability of money. The bottom line is that any business is worth where the minds of the buyer and the seller meet. Below are a few of the factors I would ask a seller to present if I were assisting in targeting a price.

FACTORS DETERMINING BUSINESS VALUE

1. Income Stream
2. Equipment
3. Fixtures
4. Improvements
5. Real Estate
6. Lease
7. Licenses
8. Customer Mailing List
9. Patents
10. Copyrights
11. Secret Recipes (formulas)
12. Franchise Rights
13. Training and Consulting
14. Goodwill
15. Key Employees
16. Terms of Sale
17. Years in Business
18. Competition
19. Legislation
20. Risk
21. Market Trends
22. Ease of Duplication

Business Depot
Larry Steinborn, Broker
239-433-1343

Know the 6 Cs when financing a business.

Six Cs of Credit.

1. Character
2. Cash Flow
3. Capacity
4. Conditions
5. Capital
6. Collateral


If you are considering borrowing to expand or start a business, it is wise to be aware of the way a banker looks at your application. The six Cs are the guideline that the banker uses to justify to his committee or underwriters that the loan to you is a good use of their money.
The biggest factor is usually character. They want to know your reputation for responsibility in paying back loans. In other words, this is your credit score. But beyond that, they will want to know your experience at the business you are operating and how sound your business plan is. Therefore,it is important that you have a good relationship with someone at your bank. There needs to be a person you can call to discuss your needs and options. If you go to the bank and constantly see different faces, then you need a new bank. I tell people that having that personal contact is much more important than saving a few dollars on fees or shopping for the absolute lowest interest rate.
Cash flow is the next most important factor. They want to see sound projections indicating enough monthly income to operate and still cover the debt repayment.
Capacity to earn is also important. This has to do with the validity of your idea. Is there a need for your product or service? Conditions are the external factors that may have an influence on your business idea. Is the location right? Are there zoning issues? What is the short term and long term economy like?
Capital has to do with your equity position in the operation. If you are not in a position to risk any of your own cash, then the banker will have serious doubts.
Collateral is considered, but is not as important as the other factors. Banks are not pawn shops and have no interest in obtaining property. It is expensive to take the collateral and reselling it is complicated, so is a last resort.
Knowing these six Cs will help you prepare a proper application for your banker. It will also help you determine with knowledge, whether you really want to commit to the obligation.

Larry Steinborn
Business Depot
239-433-1343