How to value a business and figure out how much to pay for it difficult question - a good amount of home work need to be done to derive its true values in terms of its books value. This article will cover business organization factor in terms of value.
The first step in this direction will be to find out about:
Business Organization - How the business is legally organized (corporation, sole proprietorship, partnership, etc.)
- If the business is a partnership, how many partners are there, and who are they?
- If the business is a corporation: How many shareholders are there? Who is the state of incorporation?
- Who are the major shareholders, and what percentage of the total outstanding stock does each own?
- Is the stock publicly traded? If yes, on which board there share is trading, whether it is AMEX, NASDAQ, Pink sheet bulletin, DJIA, NYSE board? How much the stock is worth and how much is the P/E ratio and book value of the company.
- How long has the business existed, and for how long under its present owners and why do they want to sell?
- Is the company engaged in any joint ventures, outsourcing, international venture or similar undertakings?
- What are the company's major accomplishments for the years? What are its failures and reasons for it?
- How is the business regarded by its customers, competitors, suppliers, employees, its bank, the financial community, the community in which it is located, and government agencies with which it interacts?
- What government agencies have regulatory or other control over the business? Is the business currently in compliance with all requirements?
- Does the company's success depend heavily on one or more key employees?
- Does the company's success depend heavily on one or more key suppliers or contracts?
- Does the company's success depend heavily on one or more key customers?
- Are there any potentially threatening situations in connection with management, products, services, finances, legal obligations, etc.?
- What is the company's litigation history?
- What are the threats to the business from new technology?
From these points we will have a basic idea about the company and whether it is worth perusing for.Robin C. Trehan is an industry consultant in the field of mergers and acquisitions. He can be reached at firstname.lastname@example.org