Small Business

Goodwill is the difference between the selling price and the estimated assigned values assigned to all the assets not including the goodwill. The seller's asking price will be broken down into its various components such as equipment, inventory, furniture, accounts receivable, miscellaneous assets, assumed liabilities and the difference will equal the goodwill.

Goodwill is the difference between the selling price and the estimated assigned values assigned to all the assets not including the goodwill. The seller's asking price will be broken down into its various components such as equipment, inventory, furniture, accounts receivable, miscellaneous assets, assumed liabilities and the difference will equal the goodwill.

When you buy a franchise, you are purchasing a business which operates under the name and image of a large company. The concept is that you get the best of both worlds. The freedom of running an independent business and the security of working for a big company. The relative freedom and security will vary depending on the franchise. Generally, you will benefit from regional or national advertising. You get associated goodwill revolving around the larger companies reputation and image. All franchise opportunities should be thoroughly investigated prior to purchasing one. Speak to your local CPA about your franchising opportunity.

File Form SS-4. You can file Form SS-4 online. Go to www.irs.gov/businesses and click on Employer ID number. Your local IRS Service Center can also assist you in getting a Federal EIN. Call IRS at 1 800-829-4933.

DUNS stands for the Data Universal Numbering System. It is a database maintained by Dun and Bradstreet that is used by the Government to identify each contractor and their location(s). This number is required to register with the Central Contractor Register (CCR) that is used by the government's electronic commerce/electronic data interchange (EC/EDI) system called FACNET. You can obtain a DUNS number at no cost by calling Dun and Bradstreet at 800-333-0505.

You can request a report from a search company that will check records in the US Patent and Trademark Office, state registers and various other business sources. There usually is a fee for this service. Some companies are: CSC, The US Corporation Company, 1090 Vermont Ave NW, Washington DC 20005, 800 241-6518. Thomson and Thomson, 500 Victory Road, North Quincy MA 02171-3145, 800-692-8833.

A college professor was overheard telling his class, "There are three basic principles for a successful business, location, location, location". You can have the best business in the world, but if it is located in a desert, your business will probably fail. Time and effort devoted to selecting your business location will mean the difference between success and failure. The kind of business you are in, the potential market, the availability of employees and the number of competitive businesses in your neighborhood should all be determining factors in your choice of location.

The Comparable or Guideline Company Approach is a method that the appraiser collects data on recent sales of similar companies and calculates the valuation multiples such as the price to earnings, price to revenue, price to cash flow. It is assumed the valuation multiples derived inherently represent the financial markets expectations of future earnings and assessments of future risk. The appraiser reviews the multiples to determine which ones are applicable to the subject entity. The guideline entity used in the final valuation analysis must bear some very similar behavioral characteristics as those of the subject entity. Speak to your local CPA or business broker for more information about valuing a business and on your pending purchase or sale.

The discounted future earnings method calculates the value today (discounted for time) of the businesses earnings in the future. The evaluator must forecast revenues, expenses, profits and cash flows. The appraiser must carefully analyze all factors and uncertainties that can impact a business’s ability to generate future earnings. Risk assessment is the most important aspect of the analysis. The discount rate, which is a percentage number usually between 15% and 100%, quantifies risk. Usually, the applicable discount rate correlates directly with yields on publicly available securities such as treasury bills, shares of publicly held companies or corporate bonds. The higher the discount rate the riskier the business. For small businesses, such as restaurants, liquor stores, convenience stores, bars or cleaners, a variety of other methods, ratios and formulas are used. These methods are unique to the circumstances and usually cannot be supported by straight forward theoretical documentation. Speak to your local CPA or business broker for more information about valuing a business and on your pending purchase or sale.