Evaluating a Locksmith Business

locksmith business

I recently was asked to evaluate a few locksmiths in Renton and that got me thinking about how to value a locksmith business.  There are a lot of choices to be made when assessing the value of a business, but the objective is clear: find an accurate estimate that will maximize return on your investment. The type of business you’re looking at, though, can have a large effect on what methods you might use to acquire said estimate.

A frequent starting place is the valuation of the business’s assets. There are typically two types of locksmith businesses: mobile and brick-and-mortar. The mobile business will have fewer assets compared to the brick-and-mortar locksmith; however, in this case, assets can be a misleading figure. A business of sufficient scale will have a large number of assets; however, this does not guarantee that the business will make you money without selling off assets.

One can also determine the value based on valuations of similar locksmith businesses – however, it can be difficult to determine the “similarity” of two seemingly like businesses.

In the case of a locksmith, which is typically a small business, you’ll likely find that the most assured method of evaluation is to first examine the company’s books, determine the annual profits (if you don’t know how to do this, you should learn before attempting to evaluate), and multiply by a standard coefficient. A common technique is to divide the profits by the current relatively solid interest rate of Treasury bills. This technique tends to provide reliable and accurate estimates and is widely used.

It’s important to remember, though, that businesses have no inherent value. Businesses are worth what they’re worth to you and the business owner– if you’ve had a childhood dream of owning a locksmith company, you’ll likely be willing to pay more than any “market value”; conversely, if the business owner had always dreamed of owning his own locksmith company, and especially if he’s put years of work into it, he may not accept an otherwise fair evaluation.

Evaluating a Company’s Credit Profile

company evaluations

Businesses undertake a credit analysis to determine their ability to meet their financial obligations. It involves analyzing audited bank statements for a company. The primary goal of embarking on this process is to assess the risks that can get borne in the case of a default. It also entails analyzing the value of the security that the company owns. It gives lenders a cushion for any unexpected losses that may result from failure to honor repayments.


How to evaluate a company’s credit profile

· Determine the ratio of assets to liabilities

It can get achieved by dividing the worth of assets by the value of liabilities. One should check out for a ratio of two or above. This ratio implies that the company is servicing its debts efficiently without any defaults. A lower ratio is a danger sign to the survival of the enterprise. It means that the firm is currently handling higher debts than it can manage.

· Check the bank statements

Lenders usually check the financial statements before issuing new loans. They look for the net earnings which should surpass the expected monthly payments. The financials which are commonly analyzed include the balance sheet and the profit and loss statement.

· Consider the length of servicing a loan facility

Existing loans that have a longer repayment period tend to be less attractive to new lenders. It is because of the risk factors involved due to the inability to determine the strength of the business in the future. Consequently, banks will opt to charge greater interest rates to cushion themselves from risks of non-repayment. Financial institutions will favor companies that have a clean record of monthly installments. You want to be sure to recognize how long do hard inquiries stay on your credit during this point.


How the credit profile affects the overall value of the company

Companies with a higher credit rating are better placed when it comes to accessing loans from lenders. It can help them meet their day to day activities since they are liquid. Creditors can be paid on time ensuring a smooth flow of business functions. Acquiring funds can also enable them to expand into other areas of operations hence reaching more customers. It gives them an edge to compete with rivals in the market. Partnering with other businesses becomes easier since new stakeholders feel at ease when it comes to availing of funds.

Credit analysis is a tasking but unavoidable process in any line of business. It aims mostly at availing crucial information needed by financial institutions that may consider lending to any enterprise. Getting accurate data is essential since it helps lenders avoid lending to risky businesses.

How To Appraise a Rug and Textile Business

rug company

A lot of people want to know how to appraise a rug company. A rug and textile company is like any other firm when it comes to buying a business. So you need to understand some important things before diving into the deep water of business acquisitions. So read on just to find out even more about this.

Assess the Assets
You need to assess the business`s assets. Take a look at the balance sheet so you can get an estimate of the value of the enterprise. You need to take a close look at the firm`s books. If you see that these books are not neat, you should walk away. The owner of the business should show you how the business is making money. He or she must have good books so you can know what`s going on. You can also value the business based on the cash flow, which means the money that the enterprise generates in revenue.  It’s also important to assess the cost of the materials and, whether or not, they are made in the USA.

Ask the Stockbroker
You can even ask your stockbroker so you can get the sales multiplier for a particular industry. This professional can help you out right away, as he or she might have done tons of valuation in many industries. Remember that you need to do your due diligence and research. You should also write a letter of intent to your seller. This document should have the terms of the purchase, the price, and the conditions to buy the business. You should also write a confidential agreement. Now, you just have to review the business`s financial statements.

Tax Returns
Take a close look at the enterprise`s tax returns. You need to review the document from the last 3 to 5 years. Look over also employee contracts, sales reports, and customer lists. Call in a lawyer to help you out dealing with the process. He or she will review any legal document. Hire an accountant to look over any financial record. You should also assemble a team of professionals in various areas of the business landscape such as operations, sales, marketing, finance, investment banking, accounting, law, valuation, and others. Make sure there is constant communication inside the team too.
As you can see, purchasing a rug firm is not hard. Remember that you can use a wide array of valuation methods ranging from asset valuation to cash flow valuation. You should keep these types of valuations constantly in mind if you want to purchase a business these days. So what are you waiting for? Purchase a rug company right now and gain more market share right away.


Why Hire an ASA?

business valuation


  • Experience  –  ASAs must demonstrate five years of full-time equivalent experience in business valuation to get their professional designation. The American Society of Appraisers also awards the professional designation AM (Accredited Member) requiring demonstration of two years of full-time equivalent experience. ASAs have experience in appraising a wide variety of companies – public and closely held, large and small – and have experience in appraising a wide variety of business intangible assets.
  • Education  –  ASA has an extensive, long-established educational program including a core series of courses, various advanced courses and seminars, an annual cross-discipline international conference, and an annual advanced business valuation conference. To get their designations, candidates for an ASA or AM designation must complete the core series of four three-day courses in business valuation and successfully finish a half-day test following each course. (Alternatively, a candidate for a designation may challenge and pass the final eight-hour comprehensive examination.) To retain their designations, ASAs must demonstrate participation in continuing education.
  • Standards  –  In their business valuation work, ASAs and AMs are required to adhere to clearly defined standards. The compliance of ASAs and AMs with these standards assures those who rely on their appraisals that there are standards for the techniques utilized and that the techniques are accepted in the professional community. The American Society of Appraisers, through its Business Valuation Committee has developed a set of Business Valuation Standards (click here to see these standards). These standards are to be used in conjunction with the Uniform Standards of Appraisal Practice (USPAP) developed and published by The Appraisal Foundation, which was authorized by Congress as the source of appraisal standards and appraiser qualifications. (The USPAP Standards can be purchased from the Appraisal Foundation at: www.appraisalfoundation.org/ )
  • Tested  –  To get their designations, candidates for an ASA or an AM must pass (with a score of 75%) four half-day tests following the first three core level courses (or they must pass an 8-hour challenge examination). In addition, they must pass a 1-hour ethics examination.
  • Review  –  An ASA’s work product has undergone strict professional review. To get the ASA or the AM designation, a business appraiser must submit two appraisal reports that meet the examining committee’s approval.
  • Ethics  –  One of ASA’s primary objectives is to ensure ethical practices and procedures on the part of its members. The society is diligent in its efforts to strengthen and uphold the Principles of Appraisal Practice and Code of Ethics (the code of conduct to which all members must subscribe) in order to protect the client.
  • Professional Journal  –  The Business Valuation Committee of ASA has published a quarterly technical journal, Business Valuation Review, since 1982. This professional journal gives ASA members access to innovative discussions of business valuation theory and practice.
  • Multi-discipline Appraisal Organization  –  The multi-discipline nature of ASA strengthens business valuation members of ASA. They have the opportunity to share information with and learn from appraisers in other appraisal disciplines, such as real property and machinery and equipment.


The meticulous ASA accreditation process ensures that ASA-accredited appraisers are accurate, impartial, and credible. They are educated and experienced in their fields and are respected members of their communities. ASAs include leaders in the business valuation field and the authors of many of the most authoritative business valuation texts. Among the ASAs who have authored leading texts, are the following:

  • Shannon P. Pratt, FASA, is the author of many texts in this field, including the pioneering Valuing a Business and The Lawyer’s Business Valuation Handbook recently published by the American Bar Association.
  • Gordon V. Smith, ASA, and Russell L. Parr, ASA, are authors of a number of books, including the recently updated Valuation of Intellectual Property and Intangible Assets.
  • Z. Christopher Mercer, ASA, is also a widely-published author and his books include Quantifying Marketability Discounts and Valuing Financial Institutions.
  • Robert F. Reilly, ASA, and Robert P. Schweihs, ASA, who along with Shannon Pratt have authored editions of Valuing a Business and Valuing Small Businesses & Professional Practices and who together authored The Handbook of Advanced Business Valuation and Valuing Intangible Assets.
  • Jay E. Fishman, ASA, along with Shannon Prat are the authors of Guide To Business Valuations, volumes 1,2 and 3.


In short, ASA-accredited appraisers have the valuation expertise you need.