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The business of small business valuation

By Kobus Oosthuizen
Businesses are valued for different reasons and the method applied in determining the value will largely depend on the reason for the valuation.
Buyers, sellers, franchisors, brokers and banks may all be interested in the value of a particular business, but as the reasons for their interests differ, all are likely to arrive at different values.
For the purpose of this article, let us assume that you are the business owner and are desirous of selling. You will need to establish the value at which you are going to put your business on the market.
The most common method employed in business valuation, is to apply an earnings multiple to current profit and then make certain adjustments depending on circumstance. This method, also referred to as the price earnings method, implies that the value of a business is primarily based on the aggregate of the profit anticipated over a certain period.
Gross valuation = current profit x earnings multiple
Current profits
If the manageme…

Intellectual property: Key aspects of copyright and know-how in franchising

In addition to the brand, two types of the intellectual property considered valuable assets and commonly licensed in a franchise system, are copyright and know-how.
Copyright is the right, broadly speaking, given to the creator, developer or author who may own the right, not to have the work copied or reproduced without authorisation.
It is important to note that, provided that time, effort, labour and skills are expended to create a work with a new original character, copyright comes into existence automatically. The work must be reduced to some sort of material or tangible form as copyright does not exist in an idea. Depending on the type of work, copyright may remain in existence for 50 more years. Any unauthorised use of the copyright in a work will amount to the infringement thereof, attracting powerful civil and criminal remedies.
Most franchise systems have at least three types of copyright works including artistic, literary and software works. More specifically these would includ…

FUNDING FUNDAMENTALS

Part 1: Introduction By Kobus Oosthuizen SA Franchise Warehouse

Over the course of 13 articles, SA Franchise Warehouse will, in layman’s terms, present a series on funding of small and franchised businesses in South Africa. Our primary objective is to explain the fundamentals and principles of small business lending and how franchise funders in South Africa apply these principles. The articles are compiled by Kobus Oosthuizen, head of Franchise Finance, a franchisee loan origination agency, which facilitates loans with most of the franchise money lenders in South Africa.

Funding is not a topic which can be covered in a single article. There is simply too much information, the details of which cannot be condensed into a couple of pages. To allow our readers to gain maximum benefit from the information, it will be presented in a short, course-like format. It is necessary that both franchisees and franchisors understand the typical conditions attached to the value propositions of the variou…

FASA HONORS THE WINNERS OF ITS AWARDS FOR EXCELLENCE IN FRANCHISING

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DOREGO’S SCOOPS FASA’S PRESTIGIOUS FRANCHISOR OF THE YEAR AWARD MASURICK VAN DER WALT, OWNER OF THE TINA COWLEY READING CENTRE IN GEZINA, PRETORIA WINS THE FRANCHISEE OF THE YEAR AWARDTHE COFFEE STOP WINS BOTH NEWCOMER OF THE YEAR AND FRANCHISOR: LEADING DEVELOPER OF EMERGING ENTREPRENEURSBRAND BUILDER OF THE YEAR GOES TO SCOOTERS PIZZAEUGENE HONEY OF LAW FIRM BOWMAN GILFILLAN IS THE RECIPIENT OF FASA’S HALL OF FAME AWARDFrom the early days when a handful of franchisors got together to lay down the business ethics that form the foundation of our franchise sector, the Franchise Association of South Africa (FASA) has been honoring its own with the FASA Awards for Excellence in Franchising. The FASA annual awards, which this year celebrates its 21st anniversary, was held recently at an elegant function attended by franchisors and franchisees representing a wide range of business sectors.
The 2011 FASA Awards for Excellence in Franchising put the spotlight not only on those franchisors …