Discounted Cash Flow valuation is the core tool in valuing a company used by Investment Bankers and Equity Analysts. The cost approach to valuation fails to capture many of the intangible assets for small business whereby reputation, managerial expertise, and other items do not show up on the balance sheet. The use of price multiples is not applicable in most cases because of the large variations of types of businesses, limited data, and the uniqueness of the business at hand.

The income approach is the dominant approach in business valuation. The discounted cash flow method captures the driving principle of a valuation: value is the present worth of future benefits. Value today equals cash flow discounted at the cost of capital. Discounted cash flow is the most commonly used method of valuation in corporate finance today. It arrives at an estimate of what one would pay today for a series of future economic streams.

The cost of capital is also known as the discount rate. It is the expected rate of return for similar investments. Discounting is, in effect, the exact opposite of compounding. To find the discount rate, take an expected payment at a point in time and compound the value backwards at the expected rate of return. The present values of each increment (year) add up to provide the current valuation. A capitalization concept is used in the final year. In capitalizing, the expected future income is converted into a value. Instead of projecting returns into perpetuity, choose a final year (called a Terminal Year) and capitalize that year’s

A venture capitalist is a person, or even an organization, that invests money in a business in exchange for a share of the company. Most of you have probably seen the show Shark Tank, where people from all over present their business or idea to the Sharks in hopes that one will invest some money into their business, either to get the business started or to help it expand. In exchange for a monetary investment, and often their connections and knowledge in the industry, the investor will want a percentage of ownership in the business. The Sharks on Shark Tank are not the only venture capitalists out there, there are plenty others looking for a great business or idea to invest their money in. Here are five ways to attract a venture capitalist:

1. Plan. Plan. Plan!

Having a solid plan is crucial to attracting a venture capitalist. Plan, in detail, how you will operate the business, how you will distribute your product or service, how you will manage your finances, and so on. If you already have an established business, even if it seems to be running smoothly, make sure you can clearly articulate how your business operates and your plan for the business, now and in the future, to a potential venture capitalist.

2. Have a strong team.

Make sure all of your employees have defined roles and execute them seamlessly. Nothing will turn away a venture capital faster than a weak team. Your employees, believe it or not, define your business. Many new business owners cannot afford to pay employees and, therefore, family is often tasked with running the business. However, if cousin Johnny is in charge of your finances and aunt

The hardest thing for most small business owners to do is relinquish control of any part of their operations. Time and time again, owners feel this overwhelming pressure to run every aspect of their business themselves. From your perspective, this is not unreasonable. You have spent countless hours and a lot of money building your business and you want to make sure it is all being done correctly and to your standards. But, take a moment and think about what that means for you. These are the tasks you’re most likely to perform:

  • Manage Staff
  • Handle payroll
  • Manage your calendar
  • Hire and fire employees
  • Answer emails and phone calls
  • Go through the mail
  • Pay bills
  • Marketing
  • Generate and follow up on leads
  • Create products
  • Prepare tax records
  • Comply with business licensing laws
  • Interview candidates
  • Manage business accounts
  • Repair equipment
  • Process payments
  • Rent space
  • Maintain the office
  • Develop a website
  • Perform market research
  • Deliver products to customers
  • Plan and strategize

Making the decision to list your business for sale is one of the most important choices that you, as a business owner, will have to make. Listing prematurely can lead to unexpected surprises in due diligence, lower valuation by prospective buyers, and even an inability to close the sale. We have compiled a list of 10 signs that may indicate that your business is not ready to be sold. If you are planning to sell and one or more of these apply to you, dedicate some time to resolving these issues – it will make all the difference!

You may not be ready to sell your business, if:

1 . All of the information necessary to run your business is in your head . This is especially true if you have trade secrets or other sensitive information that is key to successfully running the business. This information needs to be tangible so a new owner can access it as well as protect it.

2. The business’ financial documents are not in order and have not been evaluated by a CPA . This is a huge red flag to a potential buyer. There can be no cutting of corners when it comes to the business’ financial statements. Get your documents in order well before you ever plan to list.

3. Pre-sale due diligence has not been performed . When a potential buyer starts to look at your business, he or she will almost certainly perform their own due diligence, which will uncover any issues your business has. If the first time you learn about problems is when the buyer discovers them, he or she will have a huge advantage in

Certified Public Accountants come in many forms. Some focus purely on doing taxes at the end of the year while others prepare financial statements, manage payroll, assist owners in preparing their businesses for sale, assist prospective buyers in obtaining loans to buy businesses, and much more. Additionally, there are CPA firms that have become a one-stop-shop for all of your financial needs. Regardless of the situation, there are three things you can do to make sure you are finding the best CPA for your business.

1. Communication Skills

This may seem obvious, but let’s delve into what it actually means. This goes beyond whether you can get through to your CPA when you try to call him or her, although this is an important first step. When you do talk, do you understand what he or she is saying? Many CPAs use jargon when speaking to clients, which may sound impressive but does not help them understand what is going on with their finances. Find a CPA that can explain things to you in layman terms.

2. Ask for References

This is KEY to finding the right CPA for your business. Many business owners believe that just because a person has the title “Certified Public Accountant” that they are automatically trustworthy and a good fit for any business. Think about it, you are hiring this person to see some of the most sensitive financial information you have. Obtaining a reference is a small step you can take to ensure the CPA you hire is credible. Ask him or her for three to four names and