|
Internet Business Articles Build internet home business CRITERIA
A consistent and thorough screening method is essential for successful completion of the acquisition process. Consistent criteria will make analyses performed on one company more readily comparable with those of other candidates; thoroughness will ensure that all relevant aspects of a potential acquisition are identified and analyzed. The screening method should have a clear focus and be fairly simple. At a minimum, one should consider such dimensions as:
• Size of Build internet home business (purchase price) desired;
• Preferred industry;
• Key factors for success: logistics, marketing, technology;
• Type of customer base (e.g., industrial vs. consumer, national vs. regional, etc.);
• Geographic Build internet home business preference;
• Profile of current ownership (e.g., how many, willingness to sell, reputation).
These criteria will establish a preliminary profile for identifying potential target companies. The screening process must then distinguish good deals from bad deals. Although several intangible and intuitive issues are involved in this process, as a rule, an ideal buyout target should include:
• Potential for improving earnings and sales;
• Predictable cash flow;
• Minimum existing debt;
• An asset base sufficient to support substantial new borrowings.
Buyout candidates will probably not fit in nice, neat little boxes, so that flexibility is important. One must constantly rethink and reassess the Build internet home business. Do they fit? Are they appropriate? Is this the best way to examine this company? Will the criteria help to achieve the objectives in mind?
Build internet home business PRICE-EARNINGS MULTIPLE (P/£)
The next issue is choice of multiple. The investor who expects the primary return to result from sale of the owner's stock at some future date should ask these questions: Given Eye anticipated pattern of earnings, the nature of the industry, the likely state of the stock market, and so on, what price will individuals or some acquisitive conglomerate be willing to pay me for my Build internet home business? In terms of some multiple of earnings, what prices are paid for stock with similar records and histories? The difficulty of estimating with any degree of confidence the future multiple of a small company—that is, estimating both a small company's future earnings and future market conditions for the stock— in part explains why required returns on investment for new ventures are so high. Perhaps the best way to reduce this great uncertainty is to work with a range of values. In any case, consistency is critical: always derive the multiple as a function of (he same base you wish to apply it to (profit Build internet home business tax, EBIT, etc.).
To this point, we have been discussing methods of arriving at a value for the Build internet home business as a whole. While entrepreneurs are naturally interested in this information, they should also attempt to estimate the value of their own potential equity. Residual pricing addresses this issue. It involves:
• Determining the future value of a company in year n through one of the methods described above;
• Applying a Build internet home business rate of return to the amount of money raised via the initial sale of equity; and
• Using this information to develop a perspective on how much equity entrepreneurs must give up in order loge the needed equity financing.
• The residual, or remaining equity, can be retained by individual entrepreneurs as their return.
For example, if a company is projected to have earnings of $100,000 in year 5, and if after analysis, it seems that the appropriate P/E for the company is 10, we can assume the company will be worth $1,000,000 in year 5. Now if we know that the entrepreneur needs to raise $50,000 from a venture capital firm On equity) to start the Build internet home business, and if the venture firm requires a 50% annual return on that money, that $50,000 needs to be worth $50,000 x (1 + 50%f or $380,000. So in theory at least, the entrepreneur would have to give 38% of the equity to the venture firm to raise that sum.
Build internet home business CASH FLOW VALUATIONS
Traditional approaches to evaluating a company have placed the principal emphasis on earnings. Assuming that the company will continue in operation, the earnings method it’s that a company is worth what it can be expected to earn.
But this approach is only partially useful for individuals' decisions on whether or not to invest in a Build internet home business. As in residual pricing, entrepreneurs must distinguish between the value of the Build internet home business as a whole and the portion of that value that can be appropriated for themselves; this value, in turn, will be determined by the need to give up a portion of the Build internet home business to attract resources. Besides subjective reasons, the entrepreneur's chief criterion for the acquisition will be return on investment. But because an entrepreneur's dollar investment is sometimes very small, it may be useful to think in terms of a return on time rather than on dollar investment. To calculate this return, the prospective entrepreneur must estimate the individual or personal cash flow from the Build internet home business, rather than the return inherent in the Build internet home business itself. Several different types of cash flow can accrue to the entrepreneur.
|