Miyerkules, Abril 25, 2012
Three Options for Finding Capital
Increase the Market Value of Your Privately Held Company by Removing the Lack of Marketability Discount
Martes, Abril 24, 2012
The Pros and Cons of Private Placement Offerings
Sabado, Abril 21, 2012
Creative Minds: Second Market and Shares Post Are No Competition f...
Second Market and Shares Post Are No Competition for Independent Stock Market
An accredited investor is someone who has a net worth of more than one million dollars. This year they made the distinction of being an accredited investor a little more difficult by stipulating that the total net worth of the investor cannot include his or her place of residence. Individuals can qualify as accredited investors if they earn at least two hundred thousand dollars a year. Couples can become accredited investors if they earn at least three hundred thousand dollars a year combined.
At times, the seller has a hard time finding a buyer, with these companies, because only accredited investors can participate. There is a hefty transaction fee for performing this service that both the buyer and the seller pay Second Market and SharesPost. The fee is hundreds of times what you would pay online for publicly traded stock.
The independent Stock Market (ISM) works with private business owners and their shareholders to provide them with a marketplace to sell their stock. Instead of sneaking around behind the business owner’s back to trade stock like Second Market and Shares Post do, ISM works with the business owner to ensure the trading remains at the level the owner desires. One wrong move from a seller with Second Market and
SharesPost and the once private company could be thrown into public status with all the state and federal filings and reports that public status requires.
Unlike Second Market and SharesPost, accredited and non-accredited investors can participate in the buying and selling of stock with ISM. This means that you don’t have to be a millionaire to get access purchase shares in a company that you believe in.
Instead of paying exorbitant transfer fees for each transaction like Second Market and SharesPost, the Independent Stock Market has a minimal fee while allowing purchasers the opportunity of being significant partners in businesses that they believe in. In many cases, shareholders will be one of less than 500 total shareholders in companies whose stock is available on the ISM marketplace.
ISM has the consent of the business owner in making the trade. ISM allows both accredited and non-accredited investors. ISM’s transaction fees are significantly lower than Second Market and Shares Post. It’s easy to see how the Independent Stock Market performs head and shoulders above its competition.
Second Market and Shares Post Are No Competition for Independent Stock Market
Second Market and Shares Post are companies that offer shareholders an opportunity to sell their privately held stock without the consent – and often without the acknowledgement of the privately held companies. In order to participate, shareholders contact Second Market and SharesPost and let them know that they would like to sell their private stock to accredited investors.
An accredited investor is someone who has a net worth of more than one million dollars. This year they made the distinction of being an accredited investor a little more difficult by stipulating that the total net worth of the investor cannot include his or her place of residence. Individuals can qualify as accredited investors if they earn at least two hundred thousand dollars a year. Couples can become accredited investors if they earn at least three hundred thousand dollars a year combined.
At times, the seller has a hard time finding a buyer, with these companies, because only accredited investors can participate. There is a hefty transaction fee for performing this service that both the buyer and the seller pay Second Market and SharesPost. The fee is hundreds of times what you would pay online for publicly traded stock.
The independent Stock Market (ISM) works with private business owners and their shareholders to provide them with a marketplace to sell their stock. Instead of sneaking around behind the business owner’s back to trade stock like Second Market and Shares Post do, ISM works with the business owner to ensure the trading remains at the level the owner desires. One wrong move from a seller with Second Market and SharesPost and the once private company could be thrown into public status with all the state and federal filings and reports that public status requires.
Unlike Second Market and SharesPost, accredited and non-accredited investors can participate in the buying and selling of stock with ISM. This means that you don’t have to be a millionaire to get access purchase shares in a company that you believe in.
Instead of paying exorbitant transfer fees for each transaction like Second Market and SharesPost, the Independent Stock Market has a minimal fee while allowing purchasers the opportunity of being significant partners in businesses that they believe in. In many cases, shareholders will be one of less than 500 total shareholders in companies whose stock is available on the ISM marketplace.
ISM has the consent of the business owner in making the trade. ISM allows both accredited and non-accredited investors. ISM’s transaction fees are significantly lower than Second Market and Shares Post. It’s easy to see how the Independent Stock Market performs head and shoulders above its competition.
Biyernes, Abril 20, 2012
How to Determine the Value of Your Company
Quality and Depth of Management When a company has competent, well-trained managers, and many of them, the business is likely to run smooth. If your business has an established training program and strives to promote from within the organization, you are likely to rank high in this area. |
Importance of Key Personnel If there is only one key player (the CEO, for example) that is holding everything together, without a realistic replacement, you will likely score low in this risk area. Especially if the purpose of the valuation is to sell the company so that the key player can retire. |
Stability of Industry Some industries that have been stable in the past are having issues with this area currently – such as the real estate and motorized vehicle industry. If your industry has continued to move forward throughout the recession, there is a good chance you will score high here. |
Diversification of Product Line Do you stick to one product? Do you stick to several products? In most cases, valuators are looking for a happy middle ground. One product might be overtaken by an competitor. Several products might not give you the ability to concentrate on its efficiency, improvement, or marketing. |
Diversification of Customer Base In this instance, the broader the customer base, the better. I have seen several instances where companies have been purchased for the value of their customer base alone – regardless of poor inventory and management. Of course happy customers are worth more. Often this can be determined through testimonials, percent of return customers, and percent of complaints. |
Diversification & Stability of Suppliers Relationships with key vendors and the probability that those suppliers will continue their relationship with the company is a key ingredient in the valuation process. Having back-up vendors is critical as well. If your only vendor goes out of business, or raises his prices significantly, it could hurt your business. |
Geographic Location The real estate slogan “location, location, location” refers to the importance of this risk factor. Were a solid and productive company in one location to open its doors in a non-receptive place, it would go out of business. This can be determined by the number of customers, and potential customers. |
Stability of Earnings If you have had steady increases in revenue throughout the years, at least in the last three-five years, you will rank high in this area. Stability in revenue shows the potential to continue that trend in the future. Companies bringing in significant revenue consistently should seek a higher price when selling their company than those who do not. |
Earnings Margins Bringing in lots of revenue is one thing – but making a profit consistently is just as or even more important. Breaking even is not seen as big of a negative factor as losing money is. Continuous quarters in the red will bring in a lower sales price, even if the company purchasing the company has the tools and resources to reverse the negative trend. |
Financial Structure There are many factors that could determine whether businesses score high in this area. Some of which, regrettably, are subjective in nature instead of objective. Are key personnel spending “too much” on wages or perks? Is the cost of goods over 30% of revenue? What is the cost of your building and maintaining it? Are their loans with significant interest rates that will not be paid soon? These are some of the questions valuators ask about a company’s financial structure. |
How to Determine the Value of Your Company
How to Determine the Value of Your Company
Various factors come into play when third-party certified valuators are assessing the value of a privately held company for the Independent Stock Market. Here are some of them.
Quality and Depth of Management When a company has competent, well-trained managers, and many of them, the business is likely to run smooth. If your business has an established training program and strives to promote from within the organization, you are likely to rank high in this area. |
Importance of Key Personnel If there is only one key player (the CEO, for example) that is holding everything together, without a realistic replacement, you will likely score low in this risk area. Especially if the purpose of the valuation is to sell the company so that the key player can retire. |
Stability of Industry Some industries that have been stable in the past are having issues with this area currently – such as the real estate and motorized vehicle industry. If your industry has continued to move forward throughout the recession, there is a good chance you will score high here. |
Diversification of Product Line Do you stick to one product? Do you stick to several products? In most cases, valuators are looking for a happy middle ground. One product might be overtaken by an competitor. Several products might not give you the ability to concentrate on its efficiency, improvement, or marketing. |
Diversification of Customer Base In this instance, the broader the customer base, the better. I have seen several instances where companies have been purchased for the value of their customer base alone – regardless of poor inventory and management. Of course happy customers are worth more. Often this can be determined through testimonials, percent of return customers, and percent of complaints. |
Diversification & Stability of Suppliers Relationships with key vendors and the probability that those suppliers will continue their relationship with the company is a key ingredient in the valuation process. Having back-up vendors is critical as well. If your only vendor goes out of business, or raises his prices significantly, it could hurt your business. |
Geographic Location The real estate slogan “location, location, location” refers to the importance of this risk factor. Were a solid and productive company in one location to open its doors in a non-receptive place, it would go out of business. This can be determined by the number of customers, and potential customers. |
Stability of Earnings If you have had steady increases in revenue throughout the years, at least in the last three-five years, you will rank high in this area. Stability in revenue shows the potential to continue that trend in the future. Companies bringing in significant revenue consistently should seek a higher price when selling their company than those who do not. |
Earnings Margins Bringing in lots of revenue is one thing – but making a profit consistently is just as or even more important. Breaking even is not seen as big of a negative factor as losing money is. Continuous quarters in the red will bring in a lower sales price, even if the company purchasing the company has the tools and resources to reverse the negative trend. |
Financial Structure There are many factors that could determine whether businesses score high in this area. Some of which, regrettably, are subjective in nature instead of objective. Are key personnel spending “too much” on wages or perks? Is the cost of goods over 30% of revenue? What is the cost of your building and maintaining it? Are their loans with significant interest rates that will not be paid soon? These are some of the questions valuators ask about a company’s financial structure. |
When determining the value of your business, take a good look at where you stand regarding each area discussed. If you have questions, call the Independent Stock Market. Perhaps there is an area where you can improve the processes, increase the quality of staff, or decrease expenses before you have a certified valuator tell you what your company is worth.
Martes, Abril 17, 2012
Disadvantages of Companies That Choose to Stay Private
Disadvantages of Companies That Choose to Stay Private
There are several reasons why business owners decide to stay privately held. One reason is that they enjoy the non-public nature of their business dealings. It is not that they are doing anything wrong; it is just that they are not thrilled with the idea of having to explain every little expense to the public.
The other reason that business owners choose to stay private is that they are hesitant to join the public market arena. They might not want to pay the costs involved, or they might not understand how it all works. They might worry about losing control of their business model. Most of them are not familiar with the Independent Stock Market, and how these and other hesitancies of going public are removed.
So, rather than learn about the safe, inexpensive, easy-to-understand ISM marketplace, they stay private and continue to work against all its disadvantages.
In this article, we will discuss two of the disadvantages of remaining privately held.
Difficulty in obtaining capital
Private business owners use several methods in their attempt to get capital. Some use Private Placement Memorandums or Offerings. These are difficult to obtain, because business owners cannot advertise that they are looking for capital and because accredited investors must provide the majority of the capital brought in. Another means of trying to obtain capital is through banks. This has become increasingly difficult because most banks require collateral and most business owners need the money because of their current lack of collateral.
Some business owners of privately held companies have sought after venture capitalists. The large majority of these investors require either a significant amount of interest on their money, a significant percent of the owner’s company, or both. Because business owners that need capital find it difficult to find capital elsewhere, they often make this choice, often regretting the decision later.
Lower market value upon sale or merger of the company
When privately held companies receive valuations before a sale or merger, the market value, on average, is 30% lower than a company of the same size and value whose stock is publicly traded. This is because the stock in a private company isn’t marketable, and therefore cannot be traded easily. Someone buying a public company has an exit strategy that private companies do not, that is why owners of public companies receive full value for their businesses.
For private business owners who want the benefits of public companies without the challenges of the traditional markets, contact the Independent Stock Market.