Exit strategy for business

Company Timing
If you are saying to yourself, that sounds nice but how can I use
market timing to maximize the value of my business? Let's look at some
examples since there are many types of market factors that can effect
timing.(Monday 08 October 2007 : Generational Equity)

Generational Equity

Discount or capitalization rates

A discount rate or capitalization rate is used to determine the present
value of the expected returns of a business. The discount rate and
capitalization rate are closely related to each other, but
distinguishable. Generally speaking, the discount rate or
capitalization rate may be defined as the yield necessary to attract
investors to a particular investment, given the risks associated with
that investment.

Generational Equity

Decisions are something that business owners face every day and
when they have decided to sell they face the decision to sell by owner
or choose a business broker. Many may not even know or understand the
services that business brokers can provide however because they think
they are more likely to fail on their own they choose a broker. Knowing
what a business broker does will be important as well as knowing
options for those who want to try to sell their business on their own
when making this important decision. For many business owners making
the choice to sell may not have been an easy one but with the right
information they will be able to make the right decision about how to
sell.

Generational Equity : Discounts and premiums

The valuation approaches yield the fair market value of the Company as
a whole. In valuing a minority, non-controlling interest in a business,
however, the valuation professional must consider the applicability of
discounts that affect such interests. Discussions of discounts and
premiums frequently begin with a review of the “levels of value.” There
are three common levels of value: controlling interest, marketable
minority, and non-marketable minority. The intermediate level,
marketable minority interest, is lesser than the controlling interest
level and higher than the non-marketable minority interest level. The
marketable minority interest level represents the perceived value of
equity interests that are freely traded without any restrictions. These
interests are generally traded on the New York Stock Exchange, AMEX,
NASDAQ, and other exchanges where there is a ready market for equity
securities.

Generational Equity

Discount or capitalization rates
There are several different methods of determining the appropriate
discount rates. The discount rate is composed of two elements: (1) the
risk-free rate, which is the return that an investor would expect from
a secure, practically risk-free investment, such as a high quality
government bond; plus (2) a risk premium that compensates an investor
for the relative level of risk associated with a particular investment
in excess of the risk-free rate. Most importantly, the selected
discount or capitalization rate must be consistent with stream of
benefits to which it is to be applied.Generational Equity