Business Evaluation – How To Assess A Digital Company’s Worth

Business Evaluation offers an insight for entrepreneurs who want to sell their companies for cash. Equally, it’s an essential tool for the buyers, who need to conduct due diligence and make sure that the finances of a venture stack up. When it comes to valuating a brick and mortar firm, totting up the assets is straight forward. However, things become more challenging when it’s an online-only firm you want to acquire. Although putting a cash price on a virtual operation can seem impossible, there are tools at your disposal.

Many Silicon Valley outfits were helped along their way with cash backing. If you want to purchase one of them, try to ascertain whether they received a strong return on investment. Indeed, some companies may still owe money to the people or companies who offered them support when they launched, and factoring in this debt to future profitability and growth is essential. After all, if you take over the business and it fails, it could be your responsibility to reimburse the investors.

Business Evaluation needs to look at the future, as well as the past. By looking at a company’s financials in the past few months or years, patterns can emerge which show how their profits (or losses) have grown. This should then be compared with expenditure, as most companies end up spending too much (or too little) on certain costs within their business operation. For example, you might know a way to make their marketing 50% cheaper, or how to boost productivity and get better results with current staffing costs.

In the digital world, social media engagement and existing marketing tools are crucial. There are hundreds of thousands – if not millions – of websites out there. Ideally, any digital outfit needs to be visible on major search engines including Google, Bing and Yahoo. If they fail to do so, it’s the equivalent of shouting in an empty room. Although you’ve set up your stall, nobody is walking past. As such, the business evaluation should factor in the work you’ll have to do to strengthen a company once acquired.

Business Evaluation varies between social networks and e-commerce stores. For example, if you were trying to put a price tag on Facebook, you’d look at the number of users they have, and the advertising revenue it attracts per person. However, with an online retailer, you do have stock and warehouses to include when calculating its assets. One benefit, if the right mechanisms are in place, is that an online retailer can order in products when they are requested by customers, lowering expenditure considerably.

Business evaluation calculator

Business Evaluation – How To Assess A Digital Company's Worth

Business Evaluation – How To Assess A Digital Company’s Worth

Business evaluation calculator strips away the factors which may strengthen or weaken a digital company, and focus solely on the figures at present. To complete this process, you need its net profits (that’s the money left over after every single conceivable expense, including taxes, are accounted for). Ideally, you’ll have several figures which track its progress in recent years. You should look at any buildings, intellectual property rights, or technology that counts as assets. From here, advanced sums will inform you of how much it should be purchased for.

Business evaluation methods

Business evaluation methods do vary. As we said, calculators just focus on the figures, but in the wider scheme of things, this is unwise. You should always look at the current marketplace, the opportunities and threats facing the company in question, and its projected growth forecast, when purchasing a company. Remember: in the digital market, there can be fierce competition for start-ups that aren’t even turning a profit yet. For example, look at Snapchat. Facebook offered to buy it for $3 billion, but the app’s owners turned it down.

Small business evaluation

Small business evaluation also comes recommended if you want to introduce a business partner. This broadens your skillset, expertise, and their contacts can also help you to diversify into new areas. In return, the profits are divided 50/50, and they benefit from the strengths and infrastructure that your company already has. It is important to do this fairly and transparently – after all, they are going to play a starring role in the future of your company, and any discrepancies will be easy to detect. To begin with, look at how much cash would be needed to keep the business running.

Business evaluation formula

Business evaluation formula should then look at how risky your venture is. After all, in the digital world, even the biggest firms (such as MySpace and Bebo) can fall by the wayside when a new, more agile start-up comes along. Ideally, you should use case studies with other companies, enabling you to establish a precedent. Next, try to consider all of the worst-case scenarios that could leave your digital venture dead in the water. By being realistic – and doing the sums over and over again to eliminate mistakes – you get results.

Business evaluation certification

Business evaluation certification can lead to an exciting career in appraising the hottest digital companies in Silicon Valley – and the wider world – right now. That said, you need to be qualified first. There are two avenues to consider. Firstly, you might want to become a Certified Business Appraiser, or a Certified Public Accountant. Both have pros and cons. CBAs are generally more specialized and focused on valuations, while accountants have a wider set of skills and can assist their clients in other matters, too.

Business evaluation jobs

Business evaluation jobs usually hinge upon whether you are a CBA or CPA. There has been a return to apprenticeships in recent years, which involves aspiring business valuators getting on-the-job training on the tricks of the trade. This normally concludes with state or industry-approved examinations which leave you qualified. If you’re lucky enough to train within an existing firm, remember that a certain degree of loyalty is expected from staff – after all, they’re investing in you, and will want plenty of hard work of you in return.

Business evaluation models

Business evaluation models vary depending on what the plans are for the company. If an entrepreneur is buying it outright, it’s all about estimating the cash value of assets, assessing vulnerabilities, and using a profit multiplier. However, cash flow becomes the focus if a company is bringing in a new business partner. Finally, when it comes to mergers, two businesses need to assess the duplicate resources within their firm, and find the most cost-effective, productive and undisruptive way of synergizing their efforts.

Business evaluation resources

Business evaluation resources can be found across the Internet, and in accountancy offices around the US. Arranging a consultation with a specialist helps you to get advice that’s directly relevant to the company you’re planning on buying or selling. However, using resources found in libraries, blogs or in the news give you a chance to find comparable case studies of similar companies that have been bought or sold. In turn, you’ll be able to avoid making the same mistakes they did!

Michelle Seiler Tucker

If you want a slice of the digital business landscape, now is the time to your move. There are thousands of exciting companies out there for the taking. What’s more, a talented consultant can help your venture generate a selling price which reflects its future potential. Michelle Seiler Tucker is an experienced business broker who will help you sell your business and get the most money out of the deal. Michelle Seiler has business broker connections nationwide including: Louisiana, New York, Texas, Mississippi, and Illinois.

Business Evaluation – How To Assess A Digital Company’s Worth

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