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For an appraisal method to work it must address the following: | |
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- The profitability of the business
- The tangible assets of the business
- The presence of intangible assets
- The value derived should represent the market value
- Have flexibility to allow for the terms of the sale
- Simplicity - Usable and understandable
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| Components in a business that have value: | |
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- A functioning business with modest growth
- Skilled employees
- Working equipment
- Adequate usable inventory
- A quality product or service
- A profit
- Collectable receivables
- A broad customer base with no very large customer
- Some new product development capabilities
- A good reputation (name) in the market place
- A clean, adequately sized work area
- A financially sound operation with a good accounting system
- The business located correctly for its market place
- A good base of suppliers
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| Profit and asset based components: | |
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- Profit based items
- business profit
- a functioning business
- business size - gross sales
- intangible assets
- skilled employees
- a quality product or service
- a broad customer base - customer list
- new product development capabilities
- a good reputation - business name
- good financial management
- Asset based items
- inventory
- patents
- equipment
- trademarks
- receivables
- real estate
- contracts
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