Tuesday, August 3, 2021


Important Considerations For All Business Owners.

February 28, 2019 by  
Filed under Education, Money/Business, Weekly Columns

(Akiit.comAs a business owner, there are so many different parts of your company you are going to need to deal with on a daily basis. In this post, we are going to take a look at some considerations you should address at some point.

Your business structure

Firstly, we are going to take a look at the structure or the set-up of your business. This is something that a lot of owners will need to address at some point. You can read starting an LLC vs a corporation for some further insight regarding this. Of course, it is something you will think about at the start of your company, yet a lot of business owners change the structure of their company in the middle of their existence, and so it is something that will definitely need to be addressed again at some point.

You may be wondering what an LLC is. LLC stands for Limited Liability Company. This is the least complex out of all of the business structures. Some of the benefits associated with going down this route include the following:

 

  • Enhanced credibility
  • Legal protection
  • No residency requirement
  • Pass-through taxes

 

What is the value of your business?

The term ‘value’ causes so much confusion amongst those in the business world. On the surface, it seems like such a simple term. But, once you dig deeper and require any type of valuation for your business, the complexities arise.

There are a number of different reasons why business owners require valuations. Nonetheless, they tend to be related to some desire to retain or attract the next generation of advisors, monitor growth, plan for succession, or improve the business. The valuation should be seen as a starting point for which decisions and negotiations can be made, as opposed to the end game.

The problem with valuations, and this is something that never seems to be addressed, is that they are dependent on the inputs used. The process is a variable-dependent one and, therefore, different outcomes easily arise. So, if you alter the terms of a deal to increase contingency payments, then the implication for value is significant. Also, if you fine-tune your compensation plan using stock grants, the impact of doing so needs to be factored into your stock’s price.

The truth is that a lot of the conventional valuation engagements do not address the very factors for which they are being prepared to deal with. Valuations must be dynamic, yet most of them are not today. Instead, valuations measure everything that is known at the time they are put together.

Instead, for a valuation to be effective, accurate and dynamic, it needs to understand the strengths and weaknesses of every valuation, predict the future and measure performance across all applicable business drivers. With this, you are able to see the impact of value on all areas of the business, and this leads to informed decision-making across a number of areas, including planning, acquiring and hiring.

Still, it goes without saying that the word ‘value’ itself is a confusing one. If you do a quick look online, you will see an abundance of definitions, all differing from one and other, even if ever so slightly. Nevertheless, most seem to agree to the idea of fair value, which is a concept originally expressed by Benjamin Graham, who also advocated intrinsic value.

For those who are unaware, intrinsic value is the value of a company, product, currency or stock, which is determined through fundamental analysis that is absent of its market value. Why is this important? Quite simply, informed buyers care about intrinsic value, so you should too. These clients know that no two firms or clients are alike, meaning that there is not a revenue multiple that exists to give a fair evaluation of value.

To conclude, it is not difficult to see why there is such confusion when it comes to the term ‘value’. The value of something is dependent on the inputs used, and this is where disparities arise. Next time you are assessing the value of something at your business, consider the intrinsic value, and you may find that you get a lot further.

Your business taxes

Last but not least, another pressing concern for business today is their taxes. When it comes to taxes, not only do you need to make sure you pay them on time, but you need to make sure that you are taking advantage of all of the tax breaks that are available to you and that you stay up to date with the legislation impacting your industry. If you fail to do this, not only could you find yourself spending more money on taxes than you need to, but you could also end up o the wrong side of the law too. This is because you could get audited and it may even be deemed that you have not been paying the correct amount of taxes on purpose, in an attempt to be deceitful. Because of this, it is imperative to make a dedicated effort when it comes to staying up to date with your taxes and constantly reassessing your exceptions.

Final words

There are a number of different pressing issues that business owners need to be concerned with today. Hopefully, the information that has been presented above has helped you in this regard.

Staff Writer; Carl Jones


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