Business valuation: goals, approaches and methods for determining the value of an enterprise. How to properly evaluate a ready-made business? How is a business valued for sale?

AT recent times transactions for the purchase and sale of small businesses (enterprises with an annual turnover of up to $ 1 million and the number of employees up to 150 people, hereinafter abbreviated as MB) show rapid growth: more than 50% of MB enterprises change their owners during the first 3 years of their existence, with 30 % of them do it annually. In this regard, the issue of an objective assessment of the cost of MB is of particular relevance. The relative complexity of this issue is due to the fact that in any assessment, to a certain extent, there is subjectivity, which is expressed in the desire to sell more expensive or buy cheaper the business or its share being valued. In this article, we will consider methods for determining the value of an MB, which allow both to justify its high cost when selling, and to assess the investment potential of an MB when buying it.

Methods for estimating MB
The variety of assessment methods used is too great to give a complete and detailed analysis of all existing methods. In order to be able to evaluate the MB, it is enough to know 4 methods that can be used both separately and in combination with each other:

1) Replacement cost method
This method is based on the calculation of the cost of establishing an enterprise comparable in terms of financial performance, market position, existing customer base, established relationships with suppliers, staff with the enterprise to be assessed. In other words, the appraiser calculates what it would cost to create such a business if the buyer were to create such a business from scratch. Then, as a rule, a discount (discount) from the received replacement cost is taken to justify the attractiveness of the price requested by the seller (20-30%). The use of the replacement method leads to a high appraised value of the business, since it allows you to include in the appraised value almost all the costs incurred by the current owner of the business during the entire existence of the enterprise.

2) Book value method
This method is the easiest to use, as it allows you to evaluate the company according to the balance sheet: for this, it is enough to calculate the value of the assets that the company has, taking into account their depreciation, and subtract the cost of its liabilities from the amount received. This method is often called liquidation: in fact, it shows how much Money can be extracted from the game of blackjack for real money, if you stop its activities, sell assets, and pay off debts from the money received. The book value method is considered the most conservative valuation method, since it does not take into account many aspects of value that the buyer receives free of charge if this method is applied (for example, the same intangible assets). However, this method can also make sense for the seller if the company has a high book value of assets, but cannot boast of a significant cash flow.

3) Method of discounting cash flow (Discounted cash flow (DCF)method)
This method is based on an assessment of the financial results of the enterprise, in the first place - its cash flow. Most often, cash flow (Cash Flow) refers to the net profit of the enterprise (after paying interest and taxes) erected (increased) by the amount of depreciation. Discounting is a financial transaction that allows you to determine the present value of future money. It is based on the idea that money today has more value than money received tomorrow. For example, $1,000 that you will receive in a year is not worth $1,000 today, but $1,000/(1+7%) = $934, because if you put $943 in the bank today at 7% per annum, then in a year you will get 1000$. Therefore, the fair value of the future cash flow should not exceed the amount that I can invest today with less risk and get the same result. 7% in this example- discount rate, usually equal to the return on risk-free investments (in our example, the return on bonds of the Ministry of Finance of the Republic of Belarus). To use enterprise cash flow discounting, you must define the period to be discounted. It depends on how much payback you put into the project. That is, if you want to demonstrate to an investor that his investment will pay off in 3 years, you need to discount the cash flow for this period. The value of this method lies in linking the value of the business with variables such as payback and return on risk-free investments.

At the same time, one should not regard the value of a business obtained by this method as its actual price. If you say that your business is worth as much as an investor will receive in 3 years on a risk-free investment, then any reasonable investor will consider this business overpriced because with a comparable return, he will always choose less risk. Therefore, discounting should be considered as a way to determine the "ceiling" of the cost and understand that the actual value of your business should not exceed it. Moreover, you need to show that the internal rate of return of the business is greater than the return on the risk-free investment (i.e., the presence of a return premium) for it to make investment sense. Either way, the discounted cash flow method is appropriate for valuing a cash-generating business, and its value is determined by the fact that it allows the fair value of the business to be judged in the most sensible way to invest. I recommend that business buyers, in conjunction with the use of this method, analyze the income and expenses of the enterprise in order to assess the reliability and stability of the enterprise's cash flow, as well as assess its financial stability (margin of safety).

Intangible assets
Often, the valuation of the intangible assets of the business is used to justify the higher value of the business, especially when using the book value method. Some intangible assets (hereinafter - intangible assets) can be reflected in the balance sheet - most often this happens if the occurrence of intangible assets was associated with expenses that needed to be posted to the accounts accounting. However, it would be erroneous to assume that the balance sheet fully reflects the list of intangible assets that the company has and their real value. Most often, the balance sheet indicates only a small part of the obvious intangible assets and their nominal value, which may differ from the actual one. The other extreme is to classify certain functions and elements of the business as intangible assets: employees, customer base, suppliers, business processes, and in general everything that can have at least some value in the eyes of a potential buyer. It is also difficult to call this approach objective, since it aims to sell the same enterprise twice: the first time as a material object, the second time by dividing it into intangible assets. If the seller talks about intangible assets in this way, he is most likely trying to justify the asking price, which he failed to link to more real assets. An objective approach to accounting for intangible assets is to identify intangible assets that are not reflected in the assessment of the material base of the enterprise and which have an independent value in the context of a sale and purchase transaction. These intangible assets are:

1) Special permits (licenses) and certificates
The value of IA data lies in the fact that they significantly expand or vice versa are necessary requirement areas of the enterprise. Their cost is determined by the principle of substitution: about how much such permits would cost you if you wanted to get them yourself, you will be prompted by any law firm.

2) Trademarks, patents, copyrights, other intellectual property
The peculiarity of these intangible assets is that they are an independent asset that can be used to reduce the tax base of an enterprise and reduce the cost of withdrawing dividends, not to mention receiving license fees from other enterprises.

3) Insurance policies
The value of intangible assets data lies in the insurance coverage provided by insurance policies paid for by the money of the previous owners. Of course, insurance coverage is paid upon the occurrence of insured events, which do not always happen, but still the availability of insurance is certainly a positive thing.

4) Debt of the enterprise to the owners
Despite the fact that the debt of the enterprise to the owners, from the point of view of the balance sheet, is the obligation of the enterprise (its liability), it carries a value that forms a certain intangible asset. We are talking about re-issuing debt to new owners in order to use it to withdraw future dividends, which reduces the cost of withdrawing future dividends by 12% of the amount of debt.

5) Exclusive working conditions with suppliers and contractors
This intangible asset includes the discount percentage and payment terms that the company has in contrast to the standard working conditions available to any market participant. For example, an auto parts store might have a supplier discount of 35% off retail price and deferred payment for 15 days, in contrast to the standard terms of delivery with a 25% discount and a deferred payment of 5 working days. The cost of this intangible asset is determined depending on the volume of trade under these working conditions: with a turnover of $5K per month, such agreements can bring an additional profit of $500 and another $50 if the proceeds are deposited before the expiration of the grace period. As a result, in 12 months such agreements can bring additional profit of $6.6K, which, you see, is not a little.

6) Know-how
Sometimes the proposed acquisition company may have knowledge that allows it to be more effective in comparison with other similar companies. These can be standards, regulations, business processes, management and accounting principles, marketing tools. Of course, such knowledge is rarely formalized even in a simple written form, therefore, in order to distinguish it in the chaos of the enterprise's operations, it is necessary to have a fairly trained eye. However, isolated and put into proper form, this knowledge has great commercial potential - both for the enterprise itself and for any other in which it can affect efficiency.

7) The right to lease an office / retail facility
It is often the case that a business has a valuable office or retail location in terms of customer traffic or cost per square meter, resulting in an intangible asset such as a leasehold that is paid basis may be transferred to another company.

8) Site, groups in social networks
Intangible asset data is usually evaluated either in terms of the principle of substitution (how much it will cost to develop an analogue), or in terms of the number of hits generated per month. If we know such a statistical indicator as the average check, we can calculate the amount of revenue that these resources “make”. However, it is worth remembering that both the site and groups in social networks are not only assets, but also liabilities that have their own expenditure side. In order to objectively assess the costs of maintaining and promoting resources, I recommend calculating the costs per 1 appeal, which will allow you to compare the result with the average check and draw a conclusion about the potential of this intangible asset.

9) Client base
The client base is usually positioned as the No. 1 intangible asset, however, this prioritization most often occurs when intangible assets are used to inflate the value of the business. Objectively, the client base forms an intangible asset when it is designed in such a way that allows you to apply certain marketing tools to it (for example, SMS mailing) in order to receive a certain number of customer requests as a result. From this point of view, the client base as an intangible asset is comparable to a website and groups in social networks.

Hidden obligations
If accounting for intangible assets in business valuation has become a common practice, then hidden liabilities rarely appear in business valuation. These are certain tax, financial and legal aspects business, which can lead to adverse consequences for the owner, which is reflected in the additional costs that arise after the implementation of the sale and purchase transaction and fall heavily on the shoulders of new business owners. The use of the term "hidden obligations" in relation to these aspects is explained by the fact that they exist at the time of the transaction, but are rarely detected by a standard audit of financial statements, as they require interdisciplinary knowledge. Here are some examples of hidden obligations:

1) Legal claims and lawsuits
The seller may or may not be fully aware of the legal claims and claims that exist at the time of studying the business, while they often carry not only accounts payable, but also penalties and legal costs of the plaintiff, not to mention that the legal costs will have to be borne by the enterprise itself - for the representation of interests and defense in court.

2) Potential fines
Sometimes an interdisciplinary business audit reveals the commission of various actions related to closer interaction with government bodies than the usual entrepreneurial activity(importation of cars under Decree No. 6, obtaining rights to operate unused real estate, issuing and selling securities, foreign gratuitous assistance), which can be fraught with various violations and, as a result, a fine.

3) "Poison Pills"
"Poison pills" in legal practice are the clauses of contracts aimed at protecting the second party, which is expressed in the obligation of the enterprise to pay compensation in the event of unilateral termination of the contract or other actions undesirable for the party. The identification of these hidden obligations and their neutralization require a legal audit of the enterprise's contracts. A special case of the “poison pill” may be the copyright of the former owners of the enterprise for some inseparable part of it, which may eventually lead to a situation where the enterprise will be forced to pay a fee for the use of intellectual property or refuse to use it.

How to evaluate the value of a business?
Now that we have a broader understanding of business valuation methods, we can move on to formulating a strategy for determining its value. We will not use the cost replacement method, which leads to a clearly inflated cost. As a base, it is best to use the book value method, supplementing it with the value of the company's intangible assets. In parallel, we will determine the value of the business using the discounted cash flow method. As a result, we should have two scenarios: 1) the discounted value exceeds the book value + the cost of intangible assets; 2) book value + value of intangible assets exceeds the discounted value.

Purchase evaluation features
The peculiarity of the valuation when buying a business is that a) you know the value of the business (the price of the seller) and you need to determine how justified it is; b) you need to check the accuracy of the information provided by the seller by financial results work of the enterprise and the cost of certain tangible and intangible assets. As in the case of a sale, when buying a business, you need to calculate the estimated value using the discount method and correlate the resulting value with the book value plus the value of intangible assets in order to understand which scenario we are dealing with. In the first scenario, it is important to determine how reliable the information provided by the seller is, whether the value is calculated correctly net profit how stable is the cash flow.

If the business being assessed corresponds to the second scenario, it is necessary to carefully study the list of assets in the balance sheet for their objective (real) value, the list of liabilities for completeness (whether they are fully reflected in the statements) and their maturity dates. Even the correspondence of the asking price to the revealed value is not a basis for considering the quoted price as fair, since the liquidation value of the assets may actually be lower than the value that they have according to accounting data. In order to mitigate the risk, the asking price must contain a certain discount from the book value. In some cases, when the listed price is higher than the book price, the seller may say that the business has some goodwill (or that the business is worth more than its tangibles by virtue of being a business).

What is goodwill?
Goodwill is financial term, which means the difference between market value business and its book value, in fact, it reflects the amount that the buyer is willing to overpay for the ownership of the enterprise in excess of its book value. In other words, goodwill is the additional intangible value of a business that supplements its book value. In this context, goodwill is associated with intangible assets, which, in essence, constitute the content of goodwill. But since goodwill, on the one hand, is nothing more than manipulation from the point of view of accounting (let's not forget that it is used to justify the excess of the book value of the enterprise when buying it), it must in any case be related to intangible assets. If goodwill > 50% of the value of intangible assets, the cost this business I consider it overpriced< 50% — объективную, если гудвилл отсутствует вообще (при наличии НМА не менее 10-20% от базовой стоимости) — привлекательную для приобретения.

Conclusion
Thus, the business valuation technology depends on the purpose of the conduct and should take into account the reliability of the data provided, the book value of the enterprise, the generated cash flow, intangible assets and hidden liabilities. An interdisciplinary analysis at the intersection of accounting, financial accounting, tax legislation and jurisprudence can provide the necessary completeness of the analysis.

What methods (methods) are used to assess the value of a business? How is business valuation carried out by example and what are the goals for this? What documents are needed to assess the business of an enterprise?

Hello everyone who visited our resource! In touch Denis Kuderin is an expert and one of the authors of the popular HeatherBober magazine.

In today's publication, we will talk about what a business valuation is and why it is needed. The material will be of interest to present and future entrepreneurs, directors and managers commercial companies and all those who are close to business and financial topics.

Those who read the article to the end will get a guaranteed bonus - an overview of the best Russian companies specializing in business valuation, plus advice on choosing a reliable and competent appraiser.

1. What is a business valuation and when is it needed?

Any business - whether it is a plastic cup manufacturing company or an automotive complex - strives to develop and expand its sphere of influence. However, it is impossible to correctly assess your prospects without a comprehensive analysis of the current state of affairs.

It is business valuation that gives owners and managers of existing commercial enterprises a real picture of the company's assets and its potential.

When does a business need an appraisal?

sale of the entire enterprise or its shares in the form of shares;
rent of an operating business;
development of new investment directions in order to expand and develop the company;
revaluation of funds;
reorganization of the company - merger, separation of individual objects into independent structures;
liquidation of the company as a result of bankruptcy or termination of activities;
issue or sale of shares;
optimization of production and business activities;
changing the format of the company;
leadership change;
transfer of assets as collateral;
transfer of company shares to charter capital large holding;
company insurance.

As you can see, there are many situations in which a business needs a professional assessment. But the main objective there is always one such procedure - a competent analysis of the financial efficiency of the enterprise as a means of making a profit.

When initiating business valuation activities, stakeholders want to know what revenues a particular business entity is or will be generating in the future. Sometimes the task of the assessment is even more specific - to answer the questions: develop or sell the company, liquidate it or try to reorganize, whether to attract new investors?

The value of a business is an indicator of its success and efficiency. The market price of a company consists of its assets and liabilities, the value of personnel, competitive advantages, profitability indicators for the entire period of existence or a specific time period.

Small business owners and individual entrepreneurs may have a question - is it possible to evaluate the enterprise on their own? Alas, the answer is no. Business is a complex and multifaceted category. You can get a rough estimate, but it is unlikely to be objective.

And one more important nuance - independently obtained data do not have official status. They cannot be considered as full-fledged arguments and will not be accepted, for example, in court or as.

2. What are the goals of business valuation - 5 main goals

So, let's consider the main tasks that are solved during the business valuation procedure.

Goal 1. Improving the efficiency of enterprise management

Efficient and competent enterprise management is an indispensable condition for success. The financial status of the company is characterized by indicators of stability, profitability and stability.

Such an assessment is needed mainly for internal use. The procedure identifies excess assets that slow down production and undervalued industries that can bring profit in the future. It is clear that the first must be disposed of, the second - to develop.

Example
In the course of a business assessment in a trading company, it turned out that the use of rented warehouses for storing products is 20-25% cheaper than maintaining and maintaining their own premises, which are on the balance sheet.
The company decides to sell its warehouses and continue to use only leased space. There are cost savings and optimization of production processes.
Goal 2. Purchase and sale of shares in the stock market
The management of the company decides to sell its shares on the stock market. To make an economically viable decision, you need to evaluate the property and correctly calculate the share that is invested in securities.
Selling shares is the main way to sell a business. You can sell the company as a whole or in parts. Obviously, the cost of a controlling stake will always be higher than the price of individual shares.
At the same time, valuation is important for both stockholders and buyers. It is also desirable that the appraiser not only name market price package, but also analyzed the prospects for business development in general.
Goal 3. Making an investment decision
Such an assessment is carried out at the request of a specific investor who wants to invest in operating enterprise. Investment value is the potential ability of invested funds to generate income.
The appraiser finds out the most objective market value of the project from the point of view of the investment perspective. Take into account, for example, the prospects for the development of the industry in a particular region, directions financial flows in this area, the general economic situation in the country.
More information - in the article "".
Goal 4. Enterprise restructuring
The main goal of the owner ordering an appraisal during the restructuring of the company is to choose the most optimal approach to the processes of changing the structure of the company.
Restructuring is usually carried out in order to improve business efficiency. There are several types of restructuring - merging, accession, separation of independent elements. Evaluation helps to carry out these procedures with minimal financial costs.
With the complete liquidation of the object, the assessment is needed mainly for making decisions on the return of debts and the sale of property at free auction.

During the restructuring process, it is often required to carry out, current assets and liabilities of the company, complete .
Goal 5. Development of an enterprise development plan
Development strategy development is impossible without assessing the current status of the company. Knowing the real value of assets, the level of profitability and the current balance, you will rely on objective information when drawing up a business plan.
In the table, the assessment objectives and features are presented in a visual form:
№ Objectives of the assessment Peculiarities
1 Improving management efficiency Results apply for internal use
2 Purchase and sale of shares Valuation is important for both sellers and buyers
3 Making an investment decision The object is evaluated in terms of investment attractiveness
4 Business restructuring Evaluation allows you to change the structure, taking into account maximum efficiency
5 Development plan development Evaluation allows you to draw up a competent business plan
Method 3. Estimated by industry peers
It uses data on the purchase or sale of enterprises close in profile and volume of production. The method is logical and understandable, but you need to take into account the specifics of the company being valued and specific economic realities.
The main advantage of this method is that the appraiser focuses on actual data, not abstractions, and takes into account the objective situation on the sales market.
There are also disadvantages - the comparative approach does not always affect the prospects for business development and uses average indicators of industry peers.
Method 4. Estimated cash flow forecast
The assessment is carried out taking into account the long-term prospects of the company. Specialists need to find out what profit a particular business will bring in the future, whether investments in the enterprise are profitable, when the investments will pay off, in what directions the funds will move.
4. How to assess the value of the business of an enterprise - a step-by-step instruction for beginners
So, we have already found out that only professionals can competently evaluate a business. Now consider the specific steps that business owners need to take.
Step 1. Choosing an appraisal company
The choice of an appraiser is a responsible and important stage of the procedure. The final result depends entirely on it.
Professionals are distinguished by the following features:
solid experience in the market;
use of up-to-date technologies and methods, modern software;
availability of a functional and convenient Internet resource;
a list of well-known partners who have already used the services of the company.

The specialists themselves, who will carry out the assessment, must have permits and insurance of their professional liability.
Step 2 We provide the necessary documentation
The appraisal firm will certainly explain to you in detail what documents you need to provide, but if you collect the package in advance, this will save time and immediately set the appraiser on a business wave.
Clients will need:
title documents of the company;
company charter;
registration certificate;
a list of real estate, property, securities;
accounting and tax reports;
list of subsidiaries, if any;
certificates of debt on loans (if there are debts).

The package is supplemented depending on the goals and features of the procedure.
Step 3 We coordinate the business valuation model with the contractor
Usually the customer knows for what purpose he conducts the assessment, but is not always aware of which methodology is best to apply. During the preliminary conversation, the expert and the client work together to develop an action plan, determine the methods of evaluation and agree on the timing of its implementation.
Step 4 We are waiting for the results of industry market research by experts
To begin with, appraisers need to analyze the situation in the industry segment of the market, find out current prices, trends and development prospects for the area under study.
Step 5 We follow the business risk analysis
Risk analysis is a necessary stage of business assessment. The information obtained in the course of such an analysis is necessarily used in the preparation of the report.
Step 6 We control the determination of the development potential of the enterprise
Professional appraisers always take into account the prospects for business development, but it is desirable for clients to control this stage of the study and be aware of the results. It is always good to know what potential your enterprise has.
Step 7 We receive a report on the work done
The final stage of the procedure is the preparation of the final report. The finished document is divided into separate positions and contains not only bare figures, but also analytical conclusions. The report, certified by signatures and seals, has official force in resolving property disputes and in litigation.
How to conduct an assessment as competently and safely as possible for your company? Best Option– involve independent lawyers as consultants at all stages. This can be done by using the services of the site Lawyer. The specialists of this portal work remotely and are available around the clock.
Most of the consultations on the site are free. However, if you need more in-depth assistance, the services are paid, but the amount of the fee is set by the customer.
5. Professional assistance in business valuation - an overview of the TOP-3 valuation companies
No time, desire or opportunity to look for an appraiser yourself? Don't worry, take advantage of our expert review. Top three Russian appraisers included the most reliable, competent and trusted companies. Read, compare, choose.
It doesn’t matter for what purpose you are conducting an assessment - buying and selling, lending on collateral, improving management, reorganization - KSP Group specialists will carry out the procedure professionally, promptly and in accordance with all the rules.
The company has been operating on the market for more than 20 years, has about 1000 regular customers, perfectly oriented in reality Russian business provides free consultations to clients. Among the permanent partners of the company are well-known companies, small and medium-sized businesses.
The organization is a member of Self-regulatory organization ROO (Russian Society of Appraisers) and liability insurance for 5 million rubles.
The company was founded in 2002. The company guarantees prompt work (business evaluation period - 5 days) and offers adequate prices (40,000 for a standard evaluation procedure). In its methods, the organization adheres to the principles of "Ethical Business" - transparency, honesty, openness, compliance with the terms of the contract, responsibility.
Yurdis employs 20 professional appraisers, members of the largest Russian SROs. Each of the specialists has liability insurance in the amount of 10 million rubles, diplomas and certificates confirming high qualifications. Among the well-known clients of the company are Gazprombank, Sberbank, Svyazbank, Center for Organization of Military Mortgage.
3) Atlant Grade
The company has been doing business in the appraisal market since 2001. Works with tangible and intangible assets, develops and predicts ideal schemes for increasing income, cooperates with enterprises in all regions of the Russian Federation.
The list of advantages includes the reference accuracy of estimates, competent legal registration reports, a clear understanding of the goals and objectives of customers. The firm is accredited by commercial and state banks of the Russian Federation, uses an expanded methodological base in its work, and applies its own technological and scientific developments.
And a few more tips on choosing a competent appraiser.
Reputable companies have a well-designed and flawlessly functioning website. Through the Internet resource of such companies, you can get free consultations, order services, talk with managers and representatives of the support service.
Conversely, one-day firms may not have a network portal at all, or it may be designed as a cheap one-page site. No additional information, analytical articles, interactive features.
Tip 2. Refuse to cooperate with broad-based companies
Organizations that position themselves as universal firms do not always have the appropriate level of competence.

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36. Speech by Deputy General Director of OJSC MMC Norilsk Nickel D.S. Morozov at the UBS conference. Moscow, September 13-15, 2006.

Articles

How to evaluate ready business?

A few seditious thoughts

I am sure that professional appraisers will not like this article. Many of them may even want to crucify me upside down on the cross for seditious thoughts about the appraisal business. The fact is that the role of this sphere, its place in the modern economy, especially in small and medium-sized businesses, are often exaggerated, redundant, and practical conclusions are controversial.

What is by and large market valuation business? This is a determination of the cost for which it can be sold, and what profit it will bring in the future. Professional appraisers have several basic valuation methods at their disposal, the content of which is widely covered in the valuation literature and enshrined in valuation legislation.

Three methods are used in Russia: the "income approach", " costly approach" and "comparative approach". All these methods are complex, require special training, and for an ordinary entrepreneur, whose motto is "act and earn!", They will seem unnecessarily complicated and have very distant relationship.

Maybe appraisers are right with their calculations when it comes to large enterprises and transnational corporations?

Alas, not always. Otherwise, the stock market, stock trading and other securities would simply die, or would never experience the colossal fluctuations that we periodically observe. Indeed, in the stock markets, especially in countries with developed and rapidly developing economies, colossal money is spinning. Investment funds, management companies, before purchasing shares or bonds of certain companies, actually conduct a thorough assessment of the value of enterprises, rightly expecting a certain level of dividends or capital gains.
If business valuation methods were correct, then the movement of funds in the stock markets would be insignificant, since everyone represented quite accurately how much one could get by investing in a particular company. In fact, the stock market is very volatile and subject to significant fluctuations, sometimes contrary to the obvious logic and methods of calculating business valuation.

Take, for example, the latest stock market crisis. China suffered the greatest losses - since the beginning of this year, the total index of shares of Chinese enterprises has decreased by 20 percent. At the same time, China's GDP growth in 2007 amounted to 11.4 percent, the forecast for 2008 is approximately the same. So where did a fifth of the Chinese potential evaporate in a short time? It turns out that professional appraisers corrected their forecasts so quickly, having made a mistake by trillions of dollars?

What do I care, - an ordinary entrepreneur will say, - to China's GDP, investment funds of valuation methods and other high matters? And he will be right. No one but him can better assess the potential and value of his business. Indeed, in most cases, only the entrepreneur thoroughly knows all the weak and strengths their business, as well as the limit of its development. In order to evaluate the business yourself, it is enough to know a few basic points and follow common sense.

Shortcomings of Individuals

The sale of a ready-made business serves as a kind of moment of truth for an entrepreneur. The point is not even so much in how you developed it, but in the fact that by the time of the sale, due to ignorance of some legal aspects, its value may turn out to be much less than you imagined it. This is especially influenced by the choice of the organizational and legal form of doing business.

Many Russians, when starting their own business, register as individual entrepreneurs. Yes, this form has a lot of advantages: ease of registration, lower penalties, no need to make a seal and open a current account, etc.

But there are also disadvantages, one of which is directly related to the topic of the article - this form of entrepreneurship does not allow you to sell your business in one fell swoop as a complex of ready-made businesses. It is no coincidence that all business valuation methods enshrined in law are sharpened under legal entities. After all, you are acting as an individual, and all contracts, property, permits, licenses, franchises, trademark rights, etc. are executed on you.

The buyer will have to re-register all this for himself, spending a lot of time and money. Naturally, all costs, including payment for speed, affect the final amount of the transaction. And it is not yet a fact that, by renewing the contract with the new entrepreneur, the landlord will provide the new owner with the same conditions as you. He may simply not like the personality of the buyer.

So, if you intend to sell your business, in advance, minimize the number of documents that require re-registration.
It is advisable to transfer your status as an entrepreneur to the owner of an LLC or a joint-stock company when your business has reached a more or less significant scale. Then you can safely prepare for its sale in whole or in large part.

On the contrary, when purchasing a business, remember about the possible additional costs associated with the peculiarities of its organizational and legal form - individual entrepreneurs are not sold, only their property is subject to sale, and the rights under the concluded agreements are assigned.

One business, three costs!

When you are about to sell your business, you have little interest in the motives of potential buyers at first. However, it is motivation that can have a significant impact on the final price of the transaction, that is, on its market value. A buyer can have three main goals, but they are all related to generating income:

1. Sale of your business in parts or further resale. It is quite possible that you own real estate objects or the right to lease a land plot located in a promising area where active development of residential buildings or shopping malls. Or is it a resale of a regional brand that you have developed, such as Petrov's Krupa, to some large Russian or foreign agro-industrial holding, which is ousting competitors locally.

Approximately according to this scheme, the once famous Armavir Tobacco Factory, which has now become a haven for numerous offices, was bought out and then resold to one of the international tobacco concerns. In this case, the concept of liquidation value is applicable - the price of assets minus the total amount of liabilities and costs of sale.

2. Income from the activities of the enterprise. The buyer is interested in maintaining and developing the business. Perhaps some repurposing, reorganization or affiliation.

In this situation we are talking about the investment value, which takes into account the increase in profits from market expansion, the use of know-how, the prospective owner's reorganization plans. There's a lot of bargaining to be had here, just as Yahoo's shareholders did when they finally turned down Microsoft's super lucrative $44.6 billion offer. The guys from Yahoo apparently felt that in the future their company would cost much more.

3. The combination of the maximum values of the two values, liquidation and investment, results in a reasonable market value. Sell your business on this very favorable price perhaps, as a rule, to professional investors specializing in the acquisition, development and further sale of a business. These can be local businessmen involved in everything that brings money, and representatives of large companies.

Therefore, if you consider your business profitable and promising, feel free to contact large investment companies and diversified holdings of oligarchs with an offer. Surely they do not know about your existence and, if they are interested, they can give a fair price that is beyond the reach of competitors of your level. You can also advertise on specialized bulletin boards or business portals. Today in Russia there is a lot of money, the owners of which are looking for investment objects.

What is the investor thinking?

Any investor, whether it is an investment fund or your neighbor, thinks about how quickly the invested funds will pay off and begin to generate income. By the way, this is one of the most effective, but at the same time a simple and logical way to assess the value of a business. Professional appraisers would see elements of the "profitable" method in it.

In the late 1990s and early 2000s, an attractive payback period was in the small and medium, and sometimes in big business Russia 1.5-2 years. As the value of the business increased, the payback period increased to 2-3 years. And in large - and up to 5. In the West, the standard is a period of 7-8 years, which is quite reasonable, given the lower cost of credit resources.

The payback period is directly affected by several factors. First of all, total cost business, its scale - the more expensive, the longer you have to wait. But then every month there will be a much greater return.

Secondly, the value of the lending rate - the higher it is, the faster business should generate income. Otherwise, bank deposits will become a more attractive alternative than buying a ready-made business.

The third factor is the rise in prices for real estate, land and, accordingly, the cost of rent. Land and real estate are getting more and more expensive. specific gravity increases in costs, which leads to an increase in expenses not related to business development, and therefore reduces overall profitability extends the payback period.

The fourth defining moment is the turnover cycle. The shorter it is, the less working capital and funds to start and, therefore, time to recapture the money. It is one thing to sell newspapers and magazines, and another to do construction and repair work. Although the profitability is almost the same.

In practice, the calculation is simple. Let's say your two outlets ( standard kiosks) give 120 thousand rubles. net income per month. The kiosks are owned by you, but built on rented municipal land. They are not considered full-fledged real estate objects, they appear as temporary structures, and they will not let you buy the land under them, but they can be withdrawn at any time for city needs. Therefore, as an asset, they do not represent independent value. In this case, a reasonable selling price of your business, given the profitability and short turnover period, may be equal to the amount of profit that you receive in a period of one to two years - from 1.44 million to 2.88 million rubles.

The provisional principle is also followed by many large companies. For example, the Tander company, which owns a chain of stores retail"Magnet" adhered to the following tactics - opening a store in a new place, the company waited 4 months. If the store began to pay for itself, they left it. If not, closed.

For the price of an entrance ticket, or draw up a business plan

Estimating the value of a business depending on the payback period is, of course, convenient and simple, but it misses several important things that could increase its price. First, how much do similar offers cost on the market, and how much time and money would it take for a buyer to create and develop such a business on their own? It is possible that for you personally, thanks to connections in the mayor's office or equipment or premises bought on the occasion, the business cost much less and you developed faster. Selling based only on the payback period would be illogical. Therefore, it is useful to at least roughly estimate the cost of the "entry ticket" from scratch.

Calculate how much you would have spent by the time you sell current prices money for rent, purchase of equipment, advertising, what would be the total amount of costs until the moment of the first profits. In other words, make exemplary business plan, but already taking into account your knowledge of all the nuances. Such an approach is called "costly" by independent appraisers.

A business plan, even the simplest one, will help you convince a potential buyer that your business is worth buying. Try to include all your strongest competitive advantages in this business plan for the client. For example, in your hairdressing salon the best masters in the district work, for the sake of which people come to you who are ready to overpay for quality. Or that you have the best imported equipment in the area for the production of bakery products or dumplings.

A good name is worth a lot

Surely you are not the only one who is going to sell a business like yours. It is natural that potential buyer will compare all available proposals, and will most likely need to apply elements of the so-called "comparative" approach. The accuracy of the estimate depends on the quality of the collected data, since, using this approach, it is necessary to collect reliable information on recent sales of comparable properties.
This data includes: economic characteristics, time of sale, location, terms of sale and terms of financing. For example, it is one thing to sell a business for cash, another thing is to sell it on credit.

The effectiveness of the comparative approach is reduced if there were few transactions or a lot of time passed between them; if the market is in an abnormal state, as rapid changes in the market lead to distortion of the indicators. For example, a new head, a well-known lover of the redistribution of property, was appointed (elected) in a district or city. Or, as in Sochi, they decided to hold the Olympic Games.

In order not to suffer much with a comparative assessment of a business, you can resort to an analysis of franchise offers similar to your profile, which indicate the requirements for a franchise buyer. The main one is the amount of investment for the business to operate and develop. Simply put, the franchisee is asking you to work with their technology, brand, style, and so on. A franchise can be sold to almost any type of small and medium-sized business: sushi delivery, travel agencies, restaurants, stamp shops and real estate agencies, etc. Type "franchise" or "franchise directory" into an Internet search engine and you will find hundreds of offers indicating the amount needed to start a business.

However, the comparative approach allows you to focus on your individual characteristics, on intangible assets created during the work. Western economists, and now Russian ones, use such a concept as "goodwill" (goodwill - good will).
Goodwill is essentially a combination of those elements of a business or personal qualities that encourage customers to continue using the services. this enterprise or this entrepreneur, and which bring profit in excess of that which is the source of tangible, as well as intangible assets, subject to an accurate assessment in monetary terms.

It is said to occur when you make a profit higher than the average in this area of \u200b\u200bbusiness, that is, people are predisposed to buy from you.

Goodwill includes a favorable location, an established clientele, and the credibility of individual employees. This factor cannot be felt and calculated, but it is necessary to evaluate. Indeed, the development of any business is based on good relations, that is, the good will of sellers and buyers. And your task is to convince the buyer of your business that you have earned goodwill, and it is not in vain that he pays an additional 10-20 percent for a promising and promoted business.

When You Can't Do Without an Appraiser

Having fired a couple of arrows in the direction of the institution of professional appraisers, for the sake of truth it is worth noting that in practice there are moments when you simply cannot do without professional appraisers.

First, when arguing with tax office about the market value of the object of purchase and sale in the form of real estate. For example, you bought a room for a workshop for 3 million rubles, and the tax authorities, in accordance with Article 40 of the Tax Code, having the right to control prices to determine the taxable base, they say - you, brother, underestimated the cost of the room and did not pay extra taxes.

This is where the conclusion of a professional appraiser helps in a dispute with the inspection, which will become an argument for setting the transaction price corresponding to the current market value. The conclusion of a professional has the status of an official document and can be used in arbitration court as convincing evidence when considering cases related to determining the completeness and correctness of the calculation and payment of taxes. In addition, sometimes it is beneficial to officially revalue the property of the enterprise downward, which helps to save on property tax.

The second category of partners of an entrepreneur, in relations with which the opinion of appraisers can be useful, are banks. By issuing secured loans, banks try to underestimate the value of the pledged property. Determination of the real market value of the property by an independent appraiser allows establishing a fair ratio between the value of the pledged property and the amount of the loan. In case of non-repayment of the loan, the official conclusion contributes to the prevention of disagreements between the parties to the transaction that arise when foreclosing the pledged property.
Professional appraisers are a great help even if you use the services of insurance companies. There are several hidden points that insurers prefer to remain silent about.

Case of life. The entrepreneur insured the warehouses he purchased for a fairly decent amount. But when the fire broke out Insurance Company offered a much smaller amount to be paid than was indicated in the contract, stating that, on the basis of current legislation, the contract is void in terms of the excess of the sum insured over the actual (market) value of the property. It was of course impossible to determine in hindsight how much the burned warehouse cost. At the same time, the overpaid insurance premium was not returned to the entrepreneur.

If, at the time of concluding the insurance contract, the entrepreneur was armed with the appraiser's conclusion, there would be no problems - the examination carried out by an independent appraiser categorically does not allow the insurer to subsequently dispute the sum insured under the contract.

There are other times when professional assessment helps entrepreneurs. Among them, it should be noted the assessment of damage in the event of an insured event, as well as damage to the property of the entrepreneur or third parties. Knowing how much you really lost, you will be able to clearly justify your position in controversial situation including in litigation.

D. Protasov, business consultant
Magazine " Modern Entrepreneur. Individual approach to business", N 3, March 2008

№	Objectives of the assessment	Peculiarities
1	Improving management efficiency	Results apply for internal use
2	Purchase and sale of shares	Valuation is important for both sellers and buyers
3	Making an investment decision	The object is evaluated in terms of investment attractiveness
4	Business restructuring	Evaluation allows you to change the structure, taking into account maximum efficiency
5	Development plan development	Evaluation allows you to draw up a competent business plan