If I asked you, “Would you would like $100 today or $100 in a year from now?”, you would probably answer I would like $100 today, please. You understand there is time value to money. Money today is worth more than the same quantity of money in the future. Why is that?
Destroying business value is really easy to do. Creating business value is hard. Make wise choices that create a business in which a new owner can step into.
Some businesses have so much value tied up in the owner that no buyer can replace the owner. If the business and the owner are inseparable, then it is unlikely there is a buyer who is willing to buy the business. You can think of businesses in two ways: ‘equity’ businesses and ‘cash’ businesses. Equity businesses are commercial and transferable. Cash businesses are non-transferable, representing value-to-owner. A business relying strongly on personal relationships…
After knowing the value of my business, what are my shares worth? Your shares may be worth less on an individual owner basis that the value per share of all the shares. Voting control and the ability to sell the shares influence the value of the shares. Majority and minority interests describe the holdings of the voting shares. Anything less than a 50% holding in the voting shares is known as a minority…
How are Capitalization Rates and Rates of Return Related?
Every business has three assets. Each type of asset drives business value and has its own matching risk. The value of a business is underpinned by the value of its hard assets.
The value of a business is related to the quantum and probability of future cash flows. What does that mean, exactly? It means, that companies that can show success over time in gaining sales and controlling expenses have greater value.