1 / 20

STARTUPS AND BUYOUTS

STARTUPS AND BUYOUTS. CH. 4 SMALL BUSINESS MANAGEMENT BY LONGENECKER—11 TH ED. STARTING A BUSINESS FROM SCRATCH. A NEW PRODUCT OR SERVICE IDEAL LOCATION, ETC. AVOIDING OTHER’S MISTAKES. QUESTIONS. WHAT ARE SOME IDEAS? WHERE CAN I FIND NEW IDEAS? HOW DO I KNOW A GOOD THING?

hija
Download Presentation

STARTUPS AND BUYOUTS

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. STARTUPS AND BUYOUTS CH. 4 SMALL BUSINESS MANAGEMENT BY LONGENECKER—11TH ED.

  2. STARTING A BUSINESS FROM SCRATCH • A NEW PRODUCT OR SERVICE • IDEAL LOCATION, ETC. • AVOIDING OTHER’S MISTAKES

  3. QUESTIONS • WHAT ARE SOME IDEAS? • WHERE CAN I FIND NEW IDEAS? • HOW DO I KNOW A GOOD THING? • HOW DO I REFINE A GOOD THING? • WHAT CAN I DO TO INCREASE MY ODDS?

  4. KINDS OF IDEAS • TYPE A—NEW MARKET • TYPE B—NEW TECHNOLOGY • TYPE C—NEW BENEFIT

  5. WHERE DO YOU GET IDEAS? • PRIOR WORK EXPERIENCE • PERSONAL INTERESTS AND HOBBIES • BY CHANCE • DELIBERATE SEARCH

  6. HOW DO YOU KNOW IF IT’S REALLY A GOOD IDEA? • CLEARLY DEFINED MARKET NEED • COMPETITIVE ADVANTAGE • PROFIT POTENTIAL • GOOD FIT—FEELS RIGHT • NO FATAL FLAW (GOVT. OR SOCIAL NEGATIVES)

  7. Pros and Cons of Buying an Existing Business

  8. WHERE DO YOU LOOK? • TALK TO PEOPLE • SUPPLIERS • SALES REPS • TRADE ASSOC. • BANKERS • REALTORS • MATHCHMAKER

  9. WHY IS THE OWNER REALLY SELLING? • REASONS STATED MAY OR MAY NOT BE THE REAL REASONS • BE WARY

  10. REASONS • OLD AGE • ILLNESS • WANTS TO RELOCATE • TAKES ANOTHER JOB • BUS. NOT PROFITABLE • FRANCHISE NOT RENEWED • LACK OF POTENTIAL

  11. THE MATH • EXAMINE FINANCIAL STATEMENTS • GO BACK AS FAR AS YOU CAN • REALIZE MAY NOT BE WHAT IT SEEMS—UNDER OR OVERSTATED

  12. ASSET-BASED • ESTIMATE THE VALUE OF THE ASSETS • MODIFIED BOOK VALUE—ADJUSTING BOOK VALUE TO REFLECT DIFFERENCES BETWEEN HISTORICAL COST AND CURRENT VALUE OF THE ASSETS

  13. ASSET CONT. • REPLACEMENT VALUE—WHAT WOULD IT COST TO REPLACE • LIQUIDATION VALUE—HOW MUCH WOULD YOU GET IF YOU LIQUIDATED THE ASSETS

  14. MARKET-BASED • RELIES ON FINANCIAL MARKETS IN ESTIMATING VALUE—LOOKS AT THE ACTUAL MARKET PRICES OF FIRMS THAT ARE SIMILAR • PRICE-TO-EARNINGS RATIO=MARKET PRICE/AFTER-TAX EARNINGS

  15. EARNING-BASED • DETERMINED BY FUTURE RETURNS – value based on ability to produce future profits • FIRM’S VALUE=NORMALIZED EARNINGS/CAPITALIZATION RATE

  16. EARNINGS CONT. • NORMALIZED EARNINGS—EARNINGS THAT HAVE BEEN ADJUSTED FOR UNUSUAL ITEMS • CAPITALIZATION RATE– BASED ON THE LEVEL OF RISK INVOLVED IN THE BUSINESS AND THE EXPECTED GROWTH RATE OF FUTURE EARNINGS

  17. CAP. RATE CONT • MORE RISKY – HIGHER THE CAP. RATE AND LOWER THE FIRM’S VALUE • LESS RISKY – LOWER THE CAP. RATE AND HIGHER THE FIRM’S VALUE • FIGURE 4-4 • NOT JUST A SCIENCE, BUT AN ART

  18. CASH FLOW-BASED • COMPARING THE EXPECTED AND REQUIRED RATES OF RETURN ON THE INVESTMENT • REQUIRED RATE OF RETURN=RISK-FREE RATE OF RETURN + RISK PREMIUM

  19. NONQUANTITATIVE FACTORS • COMPETITION • MARKET • FUTURE COMMUNITY DEVELOPMENT • LEGAL COMMITMENTS • UNION CONTRACTS • BUILDINGS • PRODUCT PRICES

  20. INCREASING YOUR CHANCES • TEAM EFFORT • EXPERIENCE • HAVE STARTED OTHER BUS. • SERVICE OR MFG. –ALMOST HALF HIGH TECH • SHARE OWNERSHIP • DON’T LIMIT TO LOCAL MARKETS

More Related