However, a valuation can be important at other times as well. It can be useful if you are seeking investment capital, taking on a partner, or selling shares. A valuation can also indicate how you compare to your direct competitors. It can identify the strengths and weaknesses of your business. When a valuation identifies weaknesses, it can help you focus on building long-term value into your business. This will improve your outlook in terms of succession and estate planning.

However, many companies are oddly reluctant to invest in getting an accurate valuation. Only 29 percent of fast-growing companies have a current business valuation, according to a survey reported by CFO.com. A further nine percent are planning to get a valuation in the next 12 months, while 15 percent have a valuation that is no longer current. Forty-four percent of the companies had either no valuation or no plans to get one.

The survey also found that 25 percent of the CEOs had tried to sell their business at some time, but only 48 percent of that number had ever had a formal valuation. This is surprising. If you approach a major financial decision without having an effective valuation, you are in some respects flying blind.

Beware that a formal business valuation will not give you a single dollar figure that will be an effective guide to the value of your business in all circumstances. There are many different valuation methods and, unfortunately, each method is likely to yield a different dollar result.

Different methods may be appropriate for different businesses. For example, if you run a services business, there’s little point in evaluating your business based on the value of its physical assets. Other methods consider intangibles such as ‘goodwill’, which are difficult to evaluate. And value may also vary with context and subjectivity—a business may be worth different amounts to different people, depending on their preferences and needs.

This means that if you want a meaningful valuation, you will need to discuss your business circumstances with the valuer—for example, your RAN ONE business developer. You may find that the valuer needs to use a number of different methods and then come up with a final figure that gives weightings to the figures that emerge from the various methods. Good interpretation and judgment will be needed to come up with a final figure that accurately reflects the value of your business.

A number of different factors need to be taken into account in ensuring that a valuation is accurate and useful. Firstly, the valuation needs to be in line with hard data, such as your current and past financial position. Some valuation methods focus on financial data such as your profit levels, asset value, cash flow and debt levels. The valuation may include carrying out ratio analysis of these figures - for example, by calculating return on equity or investment.

Other factors are not so cut-and-dried. Valuation might focus on financial projections for the next three to five years. It might consider intangible assets, such as intellectual property. Do you own any patents, for example? Can you put a value on your trademarks and brand names? What is the value of goodwill to your business? How much has good management contributed to the value of your business, and will good management continue to do so into the future (particularly in your absence)? You also need to consider the context. Your company may be doing very well, but its value will be diminished if it is part of an industry that is in serious difficulty or in decline.

There are over a dozen different valuation methods. The crudest method operates by rules-of-thumb or ‘multiples’. For example, a legal firm is commonly valued at 40 to 100 percent of its annual fees, with consideration for an ‘earn out’ period, according to Entrepreneur.com. Landscape businesses are estimated to be worth one to 1.5 times their discretionary earnings, plus the value of their capital assets. However, multiples only give a rough, industry-wide ballpark figure for business value. They do not necessarily give the exact value of any particular business.

More accurate methods include the ‘balance sheet’ approach, which basically subtracts business liabilities from assets. The ‘adjusted book value’ method is similar, but uses current market value rather than purchase price or depreciated value.

Retail and manufacturing businesses are often value assessed according to the value of their assets, given that they tend to store large amounts of value in their inventory or capital assets. Service companies are often valued through the ‘capitalization of income valuation’ method, which places a heavy emphasis on intangible assets. It’s also possible to calculate the value of a private company by making a comparison with an equivalent public company and making appropriate adjustments. Business value can also be estimated by anticipating cash flow over a three to five year period, and adjusting that into current dollar terms.

Aside from the rule-of-thumb approach, these approaches have one thing in common: they are not simple. Business valuation tends to rely on sophisticated financial calculations, good judgment on likely prospects for a business, and an astute assessment of a variety of intangible factors.

An accurate business valuation will serve you well at important moments, such as when you are selling, merging or seeking investment. It will also help guide your general strategic planning. To get a valid and commercially useful valuation, you will need to work closely with a professional who has experience in the area. Your RAN ONE accountant already has a good understanding of your business and will be able to advise you on which valuation methods will be best suited to your business circumstances.

SoHo, You’re Working From Home?

While the statistics vary, there is no doubt that a substantial percentage of paid work is now conducted from home, and that it’s a phenomenon on the rise.

Sarah Cumberland and Lowell Tarling wrote in a recent edition of Dynamic Small Business that around 25 percent of the workforce will be based at home within the next 10 years.

Outsourcing, retirement and redundancy-driven small business startups, and people simply wanting to combine work with a family-oriented lifestyle, are all factors in favor of the Small Office Home Office (SoHo) trend.

Where once the home-based business was not taken very seriously, today it’s increasingly recognized that skill, talent, and professionalism can thrive in the relatively relaxed home environment.

Is working from home for you? It’s an individual choice, and certainly not for everyone.

Working from home means you have to discipline yourself to actually work. Many people find this easier when they have to go out to work rather than simply stroll down the corridor to a home office. For some, the paraphernalia of home and family life are just too distracting. You also need to consider whether it’s feasible to work from home. Many occupations require a registered workplace and strict adherence to workplace health and safety regulations.

Businesses that operate best from home usually involve sole traders in the service industry or with a profession. Freelance journalists, photographers, editors, public relations consultants, talent agencies, accountants, bookkeepers, financial advisors, desktop publishers, web designers, and domestic cleaning and gardening services are some of the occupations which find working from home to their advantage.

The most obvious advantage is – whether rented, mortgaged, or fully owned – you’re already paying for your home. Apart from office set-up costs, you needn’t pay any more to work from it. You can simply register a business name and get set.

Let’s say you’ve decided to take the leap. The first thing to do is work out exactly what you’ll be doing in your home office. Will you be spending most of your time in the office, or out in the field? This has a direct bearing on the amount of space and equipment you’re likely to need.

An architect, for example, has very different home office needs to someone operating a lawn mowing franchise. The architect needs space and equipment to undertake design work, a separate area to handle administrative tasks, and a place to meet and discuss work with clients. The lawn mowing franchise operator, on the other hand, spends most of his or her day in the field so may only need a small office area containing a desk, computer, telephone, and fax for administrative purposes.

Having decided on the amount of space and equipment you’ll need, you now need to choose the best place to put it. A good way to decide this is to observe how your family actually lives in the house. Where they spend most of their time at home is where your office should not be.

Good places for home offices are attics, front rooms (especially at the end of long corridors), rooms under a high-set home, or over a garage.

If you expect to have clients regularly visiting you, try to set up a dedicated meeting space away from family areas. Discussing work with clients at the kitchen or dining room table with family members preparing food or watching TV in the background is simply not professional.

Now you’ve set up your office, you need to convince family, friends, and even colleagues that – yes, this is a real office, and yes, you’re really working in it.

The strange idea lingers in some quarters that, because you’re at home, you’re not really working so it’s okay to drop in for a coffee and chat, isn’t it? Of course it isn’t, and the best way to handle this is to establish office hours from Day One.

If the business begins to expand to the point where you need to take on someone to handle the workload, it may be time to consider moving to a commercial office space. Bringing team members into your home can put you on the wrong side of council bylaws unless you’re prepared to turn your home into a registered workplace and meet the appropriate workplace health and safety laws. It can also create tension for family members who are not likely to appreciate the intrusion of outsiders needing to use the toilet or kitchen.

One solution is to outsource work to other small businesses rather than employing people to handle it in-house. A media services operator, for example, can have up to 15 people working under their direction and not one of them has to be in-house or on the payroll. You can have a team of people working from their own offices who meet regularly to discuss projects.

Working from home can offer many advantages. You can do the kind of work you always wanted to do, manage your own time and income, and spend more time with your family. However like anything else, it has to be planned if it’s to succeed.

Business & Exercise – Do They Mix?

Does the word exercise cause you an inward, guilt-tinged, groan? Do you find yourself thinking: “Yes, I must get back to it. I’ve been meaning to for a long time, but never seem to have the time”?

You’re not alone. Statistics from developed countries reveal that, four years ago, fewer than 60 percent of the population engaged in regular physical activity, with the number dropping below 55 percent over the past two years. People aged 18 to 24 are most active, with nearly three quarters participating in regular physical activity. This falls to around 66 percent for people aged between 25 and 34, and to 58 percent for those aged 35 to 44.

How many people in their 30’s and 40’s do you know whose exercise machines are gathering dust in spare rooms and garages? The machines seemed like such a good idea at the time - “Just five minutes a day to achieve that fabulous body!” But somehow, “five minutes a day” became a chore to be avoided.

Does the word exercise cause you an inward, guilt-tinged, groan? Do you find yourself thinking: “Yes, I must get back to it. I’ve been meaning to for a long time, but never seem to have the time”?

You’re not alone. Statistics from developed countries reveal that, four years ago, fewer than 60 percent of the population engaged in regular physical activity, with the number dropping below 55 percent over the past two years. People aged 18 to 24 are most active, with nearly three quarters participating in regular physical activity. This falls to around 66 percent for people aged between 25 and 34, and to 58 percent for those aged 35 to 44.

How many people in their 30’s and 40’s do you know whose exercise machines are gathering dust in spare rooms and garages? The machines seemed like such a good idea at the time - “Just five minutes a day to achieve that fabulous body!” But somehow, “five minutes a day” became a chore to be avoided.

How many people do you know who engaged personal trainers and were given time-efficient workout routines, only to lose interest after a few weeks? The routines were forgotten and their trainers’ services were dispensed with.

The trouble is, we tend to think of exercise as something we must do or should be doing. The very word suggests sweat, pain, effort, and ultimately boredom – which we all subconsciously try to avoid. Fitness experts say we should do at least 30 minutes of moderate exercise each day to stay in shape and remain healthy. Ideally, we would do two 15-minute workouts per day, alternating aerobic exercises, which improve cardio vascular fitness and burn fat, with exercises that promote strength and flexibility.

But let’s face it: many of us are just not going to be able to stick with such a routine. For a few weeks, we’ll throw ourselves into it. Then we start to find excuses to avoid it. Back to square one. Saying you can’t do exercise because you’re running your own business is of course the ultimate excuse.

You can do it though! Just find something that you really enjoy doing. Any psychologist will tell you it’s easier to commit to doing something when you enjoy doing it and want to do it, than to something you feel you should be doing.

So if you’ve always admired (and secretly envied) those fit salsa or tango dancers, why not join a class and learn? These and other energetic Latin dances promote aerobic fitness, strength, co-ordination and flexibility, while giving you a good time and stimulating your mind. You have to engage your mind to learn the steps, right?

If you’ve always wanted to take up canoeing, cycling, windsurfing, or roller-blading, stop procrastinating and do it. Once you start, you’ll be too enthusiastic to stop. And rather than seeing exercise as something separate from the rest of your life, why not make it an integral part of your life – something you do while doing something else?

Take an activity such as walking, for example. In a 1998 edition of The Physician and Sports Medicine, Bryant Stamford PhD, wrote that moderate physical activities such as brisk walking could promote health nearly as much as vigorous workouts.

The Body Break fitness website further declares that: “Walking one kilometer burns only slightly fewer calories than running one kilometer, and is less stressful on the body.” So instead of driving or catching a taxi to that business meeting three blocks away, why not make it a brisk walk? When you get there, instead of riding the elevator to the third floor, why not take the stairs? When you take a break during the meeting, don’t just sit there with a cup of coffee. Get up, walk around, and stretch.

While thinking of a solution to that tricky marketing problem, place your hands flat on your desk or on the arms of your chair and push down hard for five seconds, then relax. Do it five or six times.

There are all sorts of variations to this simple isometric exercise: hands under the desk pushing upwards, or to either side of the chair, pushing inwards. And it’s not as silly as it sounds. You’ll be toning your muscles without losing a minute from your business.

Some other ways to incorporate exercise into your daily life include:

• jogging to the corner shop for the morning paper instead of having it delivered,

• walking to the post office to collect the mail instead of asking your team member to do it,

• visiting someone in an adjoining office instead of sending an email,

• taking the dog for a walk,

• washing the car,

• playing with your kids, and

• getting up to change the TV channel instead of using the remote control.

These activities won’t get you as fit as a regular, structured exercise program. But they will help burn up calories, give your heart a workout, and put a spring in your step. Maybe then, you’ll actually feel like starting that exercise program again.

Regular Pieces

How to Make the Most of Your Newsletter

Be sure to read each article with the mindset “How could this apply to our business.” Thinking of it that way will guarantee that you get value. Better yet, take notes as you read and commit to having the ideas implemented by the time the next edition arrives. Also, make copies for each team member. To really make sure something positive happens, work with your business development specialist to talk your team through the ideas and how to set a schedule for getting them implemented. We’re here to help you get started.

Memorable Quotation

“Depend not on another, but lean instead on thyself … True happiness is born of self-reliance.”
- The laws of Manu

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While every effort has been made to provide valuable, useful information in this publication, this firm and any related suppliers or associated companies accept no responsibility or any form of liability from reliance upon or use of its contents. Any suggestions should be considered carefully within your own particular circumstances, as they are intended as general information only.

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