1 / 11

Chapter 6 & 7

Chapter 6 & 7. Starting New Business. Valuing Intangible Assets. Income Statement Method Value tangible net assets (I.e., $224,000) Determine before-tax rate of return (15%) Represents normal profit ($224,000 * 15% = $33,600) Determine actual average profit ($83,600)

liesel
Download Presentation

Chapter 6 & 7

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Chapter 6 & 7 Starting New Business

  2. Valuing Intangible Assets • Income Statement Method • Value tangible net assets (I.e., $224,000) • Determine before-tax rate of return (15%) • Represents normal profit ($224,000 * 15% = $33,600) • Determine actual average profit ($83,600) • Determine average salary ($40,000) • Determine capitalization rate • Typically negotiated between buyer and seller (25%) • Value goodwill: • $224,000 - $40,000 - $33,600 = $10,000 • Capitalize goodwill: • $10,000/25% = $40,000

  3. Taking Over Family Businesses • Planning Succession: the major cause of family business failure is lack of business succession planning for the following reasons: • Difficult for senior family members to address their own mortality. • Concern for next generation’s commitment • Transfer of control is put off until too late • Seniors are too personally tied to the business

  4. Succession Model of Family Business

  5. Advantages & Disadvantages of Starting from Scratch • Advantages: • Freedom to mold your new business • Ability to create distinctive competitive advantage • Disadvantages: • Risk of failure is higher among startups • May have trouble identifying market needs • May be tough to get noticed initially • Lots of details

  6. Types of New Businesses • Labor Intensive: is a business that is more dependent on the services of people than on money and equipment • Chiropractic offices • Capital Intensive: is a business that depends greatly upon equipment and capital for its operations. • Car manufacturer

  7. Evaluating Potential Startups • Window of Opportunity: the period of time in which an opportunity is available. • Windows continuously open and close • Windows of opportunity correlate with the product life cycle. • Product Life Cycle:stages of introduction, growth, maturity, and decline. • During the introduction stage, the window of opportunity is open and little competition exists.

  8. Getting Started • Planning: • Write a business plan • Develop market analysis - gather and analyze information about your customers. • Develop competitive analysis - understand what other businesses do and how they are perceived. • Identify startup costs - how much money will you need to start your business? • Decide on the legal form of your business

  9. Getting Started • Planning: • Determine the location of your business • Develop a marketing plan • Consider information technology and computer integration • IT can make operations more efficient (ie, use in inventory management) • IT can reduce employee overhead (ie, computers could fill out claim forms thereby eliminating a lot of time) • IT can enhance customer service (ie, computers could automatically send out patient reminders or update letters or insurance follow-up)

  10. How Will You Compete? • Operational Excellence - creates a competitive advantage by holding down costs to provide customers with the lowest-priced products. • Dell computer • Product Leaders - creates a competitive advantage based on providing the highest-quality products possible. • New Balance tennis shoes

  11. How Will You Compete? • Customer Intimacy - creates a competitive advantage by maintaining a long-term relationship with customers through superior service. • Land’s end

More Related