Things That Influence Business Value…Fixed Assets
Whether you are considering Selling or Buying a Business, or need a Business Valuation for any purpose, it’s important to understand what influences value. One influencer always is Fixed Assets – Personal Property & Real Estate. Personal Property is everything from office furniture, computers and other related technology items to production equipment and vehicles. Everything that’s typically depreciated is considered a Fixed Asset. Listed below are a few things to consider.
Personal Property Questions & Considerations
- What condition are your Fixed Assets in? Is their general condition & specific condition good or bad?
- Who provides maintenance on your Fixed Assets?
- Are they “state-of-the art” or dated?
- How do they perform and are they efficient compared to current versions?
- What needs to be replaced or upgraded and what is the estimated cost?
- What have you spent on major repairs, replacement, additions in the past 3 years?
- Do you have items you aren’t using that could/should be disposed of?
When it comes to Personal Property, function is important (Do they do what they are intended to do?). Age is always a factor as is production efficiency and that is precisely why you should be considering overall cost projections for the next few years.
Real Estate Questions & Considerations
- Is the facility used by the Business owned or leased? Who owns it?
- Current location and does it meet the needs of the Business?
- Is the business at full capacity and is there room to expand the Business?
- Is it the right size? (Too big or too small)
- How easily could the business be moved?
- What is the occupancy cost – rent, taxes, maintenance, insurance, etc.
- What is the condition? How does it “show” to customers, vendors, lenders?
- What do employees think of it? Is it attractive? Is it safe?
How Fixed Assets function is important. Image is equally if not more important – more often than not it sets the tone for everyone that comes in contact with the Business and defines its brand.
The EBITDA produced by a business is always important in determining business value, no matter what the purpose. It’s also very important to consider the likely upcoming cost to maintain, rebuild, and replace Personal Property & Real Estate. Those costs reduce EBITDA and impact business value. When we begin the process of appraising or selling a business, we look at all aspects, and Fixed Assets are important.
If you are considering Selling your Business or Buying a Business, or need a Business Valuation for any purpose, please contact us – we have experience. Everything we do is confidential.
Call (513) 852-2400 or e-mail jzoellner@zoellnergarten.com.