Prove Your Worth
Building Wealth Now
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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. Content Continues Below
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." | Giving Appraise | 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. |
Mark Henricks is Entrepreneur's
"Smart Moves" columnist.
Originally published in the July 2003 issue of Entrepreneur Magazine
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