The good news for entrepreneurs is that now is a fine time to invest in building the value of their companies. And it's not because other investment options are unappetizing at the moment. A few years ago, one of the biggest complaints of entrepreneurs was that they couldn't hire enough good people to expand.
That's not a problem now, says Nate McKelvey, CEO of CharterAuction.com, an online booking service for private jets, with 17 employees. "It's a fantastic time to find talented people," says McKelvey, 33. "When I started in 1999, anyone [who had] computer experience could make six-figure salaries. Those days are over."
Now, instead of paying inflated salaries, McKelvey can employ his company's value to build value, as he did recently by acquiring a smaller company loaded with talented employees in exchange for minority ownership in CharterAuction.com. The move preserved cash, encouraged the new personnel to accept reasonable salaries, and locked in talented people by giving them ownership.
Other entrepreneurs say now is a prime time to purchase low-cost inventory, finance capital expenditures at low rates, or improve internal accounting and management systems to boost your company's visible value. "Buy inventory now; buy equipment now," urges Ratner. "You can get fantastic deals on them, and interest rates aren't going to be this low forever."
Building value doesn't have to cost much money, much equity or even much time. Manganelli says the most powerful value-building systems are based largely on attitude shifts. The first and most important step occurs when a company's leaders start paying attention to deploying strategy, assets, operations and measurements in a systematic fashion with the goal of increasing value. Still, he says, "It is hard to do because it requires action on a lot of different planes."
But building value can be done, and entrepreneurs are waking up to the fact that the best place to make a killing in investments is right in their own companies. The stock market may be spent, but entrepreneurial companies have yet to see much of their value appreciated. "If you look at the glass as half-empty, it's a loss of value," Manganelli says. "If you look at it half-full, it's value to be gained."
Thousands of people from all walks of life are willing and, to varying degrees, qualified to place a value on your business and help you to increase it. These include business brokers, investment bankers, accountants, attorneys specializing in mergers and acquisitions, and even more than 4,000 professionally certified valuation analysts. Not all valuations are the same. Bankers, for instance, may look mainly at the price a company's assets would bring if broken up and sold.
Business valuators can be found in every city and town, and their services are available for prices as low as nothing-investment bankers will often perform a valuation, the cost of which is built into the commission they hope to receive in a sale or other disposition of the business. The most important thing to look for is experience and credentials that match the reason you are seeking a valuation, whether it's for estate or succession planning, pending litigation or some other reason. You can find a directory of accredited valuators at www.nacva.com, the Web site of the National Association of Certified Valuation Analysts.