10 Reasons You Should Get a Business Appraisal

Business appraisals are an economic analysis, or professional engagement, to conduct business valuation in order to determine the worth of a business, professional practice or certain business assets. They are a critical tool in any business owners’ arsenal, and should be considered right from the day the business concept originates through the life cycle of the business.

Reasons for Business Appraisal

Here are the top 10 reasons why you should get a certified business appraisal.

– Your business is in the startup phase and you need to value it to determine how much of it you will have to give to investors in exchange for seed money.

– If you’re an established business and have to provide quarterly or annual updates to your investors or other stakeholders. This will give your stakeholders a clear picture of the financial health of the business that shows them exactly what the worth of their current investment is.

– You may find an opportunity to sell or merge which needs to be decided quickly. Having an up to date business appraisal allows you to take advantage of the opportunities.

– You may want to take on a new partner and you need to know the value of your business to determine the buy-in price.

– With the array of new fundraising options available to small-business owners, it’s important to know the value of your company before you begin fundraising.

– You may want to expand or build new facilities, and taking your business appraisal to the bank will help them make the decision to lend money.

– To determine the annual per share value of an Employee Stock Ownership Plan (ESOP). ESOP is used when you want to share ownership of your corporation with your employees.

– For gift tax planning purposes such as transferring an interest to family members, donation to a charity, transfer to an intentionally defective grantor’s trust, etc.

– For litigation support purposes, to determine economic damages, lost profits, uncover fraud or value of a business in a shareholder or partnership dispute.

– To identify whether the business is growing, stagnant or declining in value to restructure the business.

Business Appraisal Techniques

Some of the business appraisal techniques are as follows:

– Asset Approach

The asset approach examines the assets of the business to determine the value of the assets of the business. This method would be particularly significant for a business that is closed down and being liquidated.

– Income Approach

This approach concentrates on the main purpose of the business, which is the income it generates through its operation. Detailed discovery and analysis of various streams of income and types of expenses are performed. Projections of future income and expenses are also taken into account.

– Market Approach

This approach treats the business as an object available in the marketplace for purchase or sale. This method relies on finding closely similar or comparable businesses in the marketplace that recently were sold.
This list is not exhaustive and there are many other reasons that a business appraisal may be needed. A certified business appraisal is a complex financial analysis that should be undertaken by a qualified valuation professional with the appropriate credentials.

Is Your Business A Potential Target For The Next Digital DISRUPTION?

What does Digital DISRUPTION mean for your business? If it’s the destiny of every business what can we do to prepare for it? Let’s dive in and find out!

Drive for digital has already happened!

According to a forecast by Accenture, in just 5 years, Australia’s digital economy is going to experience a 26.1% growth from 2015 to 2020.

Business around the globe are spending $174 billion on cloud technologies alone. Many organisations now have chief digital officers or have developed separate units that are responsible for driving digital strategy.

While the stats look promising, many business are still struggling with their organisational structures to facilitate the change towards digital transformation and to face the digital disruption challenges head on!

Innovation is transforming every business!

The phenomenon of digital disruption is not a new one! Nonetheless the opportunities and risks it presents change over time and those who make the first move, history remembers them as innovators!

Ever wondered how iPod replaced CDs, how Amazon defeated Barns and Nobles, why didn’t Marriot think of AirBnb, why cab drivers couldn’t come up with a brilliant idea that Uber did and how Netflix became the number one choice of Blockbuster’s long-time customers!

Businesses that are bold enough to innovate, serve as the poison pill for those that are still following the rules of the last century!

Speed of change remains critical!

When I say only the agile survive, it means that not do businesses need to innovate and change their business models, they need to do it at the speed of digital disruption, in order to survive!

From the rise of digital, to beginning of internet era, to social media and now mobile, technology, every couple of years, digital seems to be disrupting every aspect of our lives and that too at an unprecedented pace.

Instead of embracing and expanding the new digital wave, Kodak, Polaroid and many others spent their time and energies on defending the status quo. By the time, they realised digital photography is here to stay, it was already too late!

Rethinking value creation

One thing that’s common among all these innovators (Netflix, Uber, AirBnB and many others) is their ability to pin point a gap in existing products and services and filling it by rethinking a solution that creates greater value for the users! Most importantly the core of their investment is focused on the customer and supplier value proposition not product or services they serve!

Do you really think Marriot knows what a hotel industry is all about? Without having to own property, hire and train housekeeping staff or be on call 24/7, AirBnB was able to run a simpler and more efficient business model that was profitable to all parties (i.e. customers and suppliers) involved!

AirBnB’s impact on the hotel industry is yet another example! “Digital disrupters know how to rethink value creation and create a new market space that did not exist before!

Businesses can deliver value to customers using the five steps in the interaction curve: Buying, using, transferring, co-creating and integrating products and services! Business that are able to offer greater value in terms of novelty or efficiency on any of these customer touch points.

Understanding the magnitude of change

The magnitude of disruption can often potentially wipe out major businesses and sometimes entire industries.

Understanding the magnitude and the scale at which a new business model will affect your remains critical. Consider how YouTube’s “How to” videos is impacting formal education and how online booking for travel has almost eliminated the traditional role of travel agencies.

Personalisation of products, services and interactions

Today, consumers are actively approaching businesses they can interact with on a personal level. Digital Marketing analytics has made it possible for businesses to reach their customers with a personalised, relevant and targeted message, which they are more likely to welcome than cold calling or mass marketing methods. It’s the customers who dictate the business, not the other way around.

In the era of internet of things, wearable technology and social media, suitability, affordability and timeliness all play a vital role in delivering personalised service to the target market!

Timing is everything

Businesses that can anticipate the disruption before it happens, become leaders! Such businesses see themselves in a powerful position to launch themselves as pioneers in a field and sustain that image by continuing to innovate.

On the other hand, if the alternate solution does roughly the same or better job more quickly and at a cheaper cost, it will only be a matter of time that this new business model improves to a point that your solution will become irrelevant!

When Reed Hastings, founder of Netflix offered John Antioco, Blockbuster’s CEO to promote Netflix in its stores in return for Netflix running Blockbusters’ brand online, he got laughed out of the room. 10 years later Blockbuster went bankrupt and Netflix rose to a multi-billion dollar company.

Those who survive the wave of disruption, make a move before it’s too late to make any move at all.

Investment in digital infrastructure

Digital disrupters understand that technology alone cannot make all the difference. True disruption happens with the right integration of technology, people and processes with a change in the overall organisational structure and business model.

Whether it’s by hiring new talent, reinforcing new vision, or reallocating budget to new digital technologies and better customer interactions, business need to find a way to survive the wave of disruption quickly sweeping over the industry they serve.

Opportunities to survive digital disruption

Despite the eye-popping examples of digital disruptors vanquishing seasoned market players, According to Global Centre for Digital Business Transformation, 45% of company leaders believe that digital disruption is not a broad-level concern!

For those who do realise the threat it poses are in a better position to act on time. So what are the opportunities for those willing to survive digital disruption?

1. Disrupt the disruptor – Challenge the competition before it starts (Jet.com has become a threat to Amazon – the greatest disruptor of the 21st century)

2. Secure your position – “If you can’t be as good as them, buy them! (Facebook acquired WhatsApp) acquire

3. Absorb digital capabilities – Integrate online and offline customer interactions (AudiCity – Audi’s showrooms where you can custom design virtual car models on a digital screen)

4. Follow the footsteps – Learn the disruptors’ tricks and infuse a digital first mindset within your organisation.

Next wave of disruptive technologies

Digital Disruptors are always ready for the next wave of disruptive technologies that might hit their industry or affect their value chain. Preparing for a response towards potential threats and maximising the organisational capabilities to bring digital business innovation is what businesses need to do.

Even if you are a market leader today, to continue being so, businesses need to become their own disruptors!

Get out of your comfort zone and challenge your own silos and business processes, before someone else does!

Conclusion

Digital disruption is already happening and no one can escape it.

Applying high-level digital technologies to your business without understanding their potential impact, can be deadly. The need for businesses is to

Understand which companies are most prone to steal your share of the pie and how?
How can you disrupt your own business model to keep your competitors from narrowing the circle in the first place?
Can you use digital technologies to improve the customer experience throughout the value chain?
Do you have the right set of skills to compete in the age of connectivity, collaboration and rapidly evolving customer needs?

Digital disruption can be unpredictable and overwhelming, but those willing to take the risks are rewarded immensely!

Is your business a potential target for the next digital disruption from Logan Nathan Attention Business Owners: Are you lagging behind in Digital Transformation Strategy for your business? Feel free to Contact us to examine your business digital disruptive potentials and turn them around before it is all too late!