Small Business: Summary Business Valuation - Low cost, How to Value Your Own Business - No cost course.
VALUE-A-BUSINESS.COM
The online business valuation center of C&S Associates
Helping business owners since 1979
BUSINESS VALUATION CALCULATOR - BVC
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INTRODUCTION

Do you want to automate and simplify the calculations in our Free "How To Value Your Own Business" course, or.....

Are you familiar with the basic concepts of valuing a business and basic accounting terms and want to jump right to it?

Our C&S ASSOCIATES ONLINE BUSINESS VALUATION CALCULATOR or BVC will assist you valuing your business with the following features:



SAMPLE REPORT

Here is how the top of your online BUSINESS VALUATION report might look.





Click Here for The Demonstration Report (New Web Page)

BVC Benefits


CONFIDENTIALITY

Confidentiality regarding private business financial data is a serious concern of all business owners that we have respected since our founding 1981.

We use a unique feature of the web that allows us to attach your variables to the end of your web address. (We don't use "cookies".)

You will be able to store your data ON YOUR COMPUTER as a Favorite or Bookmark. You may then reuse the data for a month to refine your analysis.


ACCURACY

The BVC has been checked and rechecked. You avoid the possibility of making a calculation mistake - not a good situation if discovered by your banker or another stockholder.


SPEED

Using the BVC you can easily change the weights, allocation percents, and valuation variables and immediately recalculate the results.


MULTIPLE "WHAT IF?" SITUATIONS

With the BVC you can try out various combinations of the discretionary expenses and one time expenses, and use different weights, allocation percents and variable. The different combinations can easily be saved for future reference on your own computer.

If you own more than one company, you can use the BVC to compute a value for each company.


LOW COST

The low cost to use the BVC for one month is $29.95 USD. What's an hour of your time worth to do the calculations by hand?


PRINTER READY REPORT

Your BUSINESS VALUATION report is ready to print directly from the BVC web page. There is no need to type the results of your manual calculations.


TELEPHONE CONSULTATION

With BVC, you also receive 15 minutes of free telephone consultation. You may use that time to talk about:

Additional phone consultation is available for $25 per quarter hour.

Pete Smith
C&S Associates
205-987-5315



GETTING YOUR PASSWORD

You may get a password in any of three ways.

1. ONLINE IMMEDIATE ORDER

You may order using our host's secure server to safely enter your credit card information and we will email you a password immediately. CLICK HERE. We accept Visa, Master Card and American Express.

2. PHONE

You may call (205) 987-5315 (Office) or (205) 837-4845 (Cell) for your password. We will take your credit card information over the phone. We are generally near the phone from 9:00 am to 6:00 pm Central Time. If we're not here, please leave your area code and number and a good time to call. We'll get back to you as soon as possible.


3. BY MAIL

Send your check for $29.95 to:

C&S Associates
P.O. Box 361325
Birmingham, AL 35236

Be sure to include your complete e-mail address with your check. You will be sent a Password by email.



ENTER PASSWORD

For your own confidential C&S ASSOCIATES ONINE BUSINESS VALUATION CALCULATOR, enter your password below.

READ THIS FIRST - When the new page appears, scroll to the bottom section. This section will include Data Input instructions and sample data. Also, on the screen will be our default values for the annual weights, allocation percents and valuation variables which may be useful for many BUSINESS VALUATIONS. These may be changed at your discretion. You will also find a link to all of the "How To Value Your Own Business" course lessons.

Enter Password in Box, Click "Go To BUSINESS VALUATION" button

ACTUAL BVC USER COMMENTS

HOW MUCH IS MY SOLOPRENEUR BUSINESS WORTH?
HOW DO I INCREASE ITS VALUE?
by: Pete Smith
C& S Associates

Solopreneur and solopreneurship have not made it into mainstream dictionaries, yet! They will very soon. A solopreneur is a one man or one woman business usually built around a niche product, service, or expertise. Many are viable because of the marketing and communication possibilities offered by the Internet.

Consider this solopreneur business. A man (or woman) has a specialized expertise in the influence of Chinese culture on their consumer buying habits. With emerging markets in China, he has established from word-of-mouth contacts about fifteen middle-sized retailers as consulting clients that are in various stages of developing their presence in China. His billing rate is $200 an hour, $2,000 a day, and an extra $1,000 a day for travel overseas including travel time. All expenses are invoiced separately. He has grossed over $250,000 a year for three years with about 15-20 specific assignments per year, many overseas. It is a nice business; many of us would like to have something similar to it.


VALUATIONS FOR SELLING THE BUSINESS

What is it worth if he wanted to sell the business and retire? Not as much as one might think or as he would want for the business.

Limiting Factors

Consider these limiting factors:

  1. A limited number of people have the same expertise or desire to travel.
  2. The solopreneur may help the new owner with a transition, but it is unlikely he will be as committed to the business from his retirement position. This may eliminate larger retail or consulting companies as potential buyers.
  3. Separate assignments generate the fees. There are no retainer contracts or assured future business, (neither of which may be transferable).
  4. There are no ancillary on-going revenues such as translation services or maintenance agreements: more typical in a solopreneurship selling a product, software, or technical support.
  5. It is hard to determine the length of time that this expertise will continue to be in demand.
  6. A buyer will be concerned over the transferability of the business relationship, which has probably been build around a personal rapport between the solopreneur and the clients.
  7. The client list and a non-compete have value; however, buyers will offer only minimal cash up front until future revenues from the current clients are realized.
  8. The office furniture and equipment have some minimal value, although it is likely the buyer may already have an equipped office at home or something similar.

Under this particular scenario, it is hard to imagine the solopreneur receiving more than $25,000 to $50,000 at closing. An earn-out might include 30% of the first year's revenues from the current clients and a declining percentage for the next 2 to 4 years.

Increasing the Value

Removing or reducing the limiting factors will increase the value of the business.

The solopreneur should plan to stay active and full time in the business for 2 to 5 years after completing a sale as either an independent contractor or an employee of the buyer. This opens a new field of potential buyers including large retailers with multiple store names such as Federated or May Department stores. In addition, larger international consulting firms might be interested in the client list and the established business relationships where the owner would serve as the lead consultant on future assignments.

Caveat

One important caveat for the solopreneur is to look at the down side in negotiating the sale of the business. There are two conditions.

First, what if the buyer breaches some kind of a future commitment financially or otherwise? Is the solopreneur legally and business-wise ready to step back into a solopreneurship role? Does the non-compete agreement become invalid in the event of a breech? Is there recourse to the rights for publications, copyrights, patents, etc.? Is there an arbitration clause to settle disputes quickly rather than letting a big company tie up the solopreneur for years in litigation?

Second, what if the solopreneur and the buyer have a falling out? There is not a breech and there are no ensuing legal or arbitration actions. What position will he be in to resume solopreneurship activities or go to work for someone else?

These down side conditions are the subject of entirely separate articles, but they are important to mention here. A large percentage of business acquisitions, especially those between businesses of significantly different sizes, just do not work. The cultural differences between a solopreneurship and a bureaucracy may be too great. Solopreneurs tend to look at the world very optimistically, through "rose colored glasses," and discount the down side conditions. The solopreneur must consider these down side conditions in determining if the value of the business meets his or her needs and expectations.

Value as an Employee

The equivalent salary for this individual as an employee might be in the $150,000 to $200,000 range. The employer would typically pay certain taxes and fringe benefits such as health insurance.

Two immediate sources of closing cash to the solopreneur going to work for a larger company are a signing bonus and the equivalent of a recruiter's employment fee assuming a recruiter was not part of the sale process.

Signing bonuses can be from one to twelve months pay, the larger amounts usually reserved for professional athletes. An employment fee may be as much as 40% of the first year's salary. A good negotiation point is that these fees can be considered separate and apart from the value of the solopreneurship.

Negotiate up front a severance agreement in the event of termination of the employment contract. This may or may not be considered part of the value of the solopreneurship.

Other Sources of Value

The solopreneur should increase the long-term financial commitments by his clients in the form of retainers or annual contracts. Any contracts should allow transferability as long as the solopreneur is the lead consultant on the assignment. Negotiate a percentage of any additional billing for other services developed from these clients performed by other members of the new employer's company. Argue that these assignments were obtained because of the prior relationship or the solopreneur.

Regular weekly, monthly, or annual fees for ancillary services add value. These services may be done between assignments or sub-contracted. Again, any agreement with the client should allow transferability, and one should negotiate a percentage of future revenues from a buyer or new employer.

A large network of related services will add value to the solopreneurship. An owner known in an industry for business relationships with trade associations, with vendors and customers of current clients, with other consultants, etc., increases the value of the business. If the solopreneur is the middle of his or her career and intends to stay active in that industry, then negotiate the right to maintain these contacts and participate in the industry's activities.

Similarly, established marketing and advertising channels beyond just word-of-mouth add value. Perhaps the solopreneur is known for his or her trade magazine articles, is the editor of a monthly trade magazine column, or has published a book. Maybe the solopreneurship annually sponsors the coffee at the first break session at the industry's international trade show. Any repetitive marketing that brands the solopreneurship will add value in a sale, assuming the individual goes with the sale. Negotiate the right to retain the connection to these marketing channels.


OTHER VALUATIONS

How do these issues effect valuations for other purposes such as estate values, divorce, life insurance, partnerships, gifting, etc.?

An estate situation is similar to the retirement situation. The deceased individual is no longer available to generate the income, so the value is correspondingly lowered.

For disability and key man life insurance, the reverse is true. The event of death or disability has caused the individual to cease generating this excellent income. A higher valuation is proper.

In a divorce, the lower valuation issues apply unless the other spouse has invested directly in the business or materially contributed to the management of it. Another consideration is if the family lifestyle was significantly reduced or retarded during the startup of this business.

A divorce of a medical doctor often includes this consideration as the years spent in medical school and spent in training are often very lean. Then within a few years of private practice, the ongoing practice, even with large equipment loans, may have significant current value and even higher future potential value. The spouse of the doctor is entitled to a higher than minimal value as compensation for the leaner years. This may apply to certain other professional fields as well.

In certain cases, a partnership is essentially two solopreneurships of equals tied with a partnership agreement for perhaps legal, insurance, tax or other purposes. Assume the compensation of an individual partner is aligned more to his or her individual performance rather than their joint performance. Then the value of the one partner's interest to the other partner is minimal in any kind of a breakup where the partners are going to continue to be active in their industry.

Gifting of interest in a solopreneurship would normally not apply unless there was some purpose of moving income into a trust or to another beneficiary perhaps for tax purposes.


SUMMARY

The key issues to the results of a solopreneurship business valuation lie in the availability and enthusiasm of the solopreneur after some event. The higher the availability and the more enthusiastic the individual is toward generating revenues, the higher the current value of the business.

Each situation is unique. Higher valuations are desired in certain cases including a business sale. Certain other transactions or events call for lower valuations. Sorting out the issues and developing the arguments to defend the valuation in a sale, tax, or legal matter requires professional expertise.

Copyright 2006, all rights reserved

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