Komal Rajani – My Freelance Academy

Top 8 Amazing Work From Home Jobs For Moms

Are you a stay at home mom, wanting to join the workforce? How does work from home jobs for moms sounds? Then, this post is definitely for you to read.

Here, in this, we will talk about what are the best work from home jobs for stay at home moms, how to find them, and how it will lead you to have a successful career.

Are work from home jobs for moms a good option

There are hardworking moms that want to earn a bit of extra money while working from home, so you can also spend time with your kids. That is why work from home jobs for moms are greatly favorable during this time.

In work at home jobs, the working hours are flexible, so you can work around your children. You also have the option to work part time or full time job.

There are many home jobs in the job market, that you can get without a degree. These jobs can be turned into a full career that pays well if you choose well.

So, if you want a flexible job and yearns to showcase your skills, you should definitely try a home job.

Preparing for work from home jobs for moms

1. Resume and cover letter

Your resume is like your marketing brochure. Whereas, your cover letter is your introduction to your resume.

An important purpose of a cover letter is to link your experience directly to the job description. Look at the description mentioned in the job sites, relate directly to those in your resume and cover letter.

Your resume is the most significant document you will have to create for applying to online jobs.

You can use this guide to make your perfect resume and cover letter.

2. Computer/ laptop

A computer/ laptop is a must, for your stay at home job. It is the most important thing for work from home jobs for moms. Most of the remote jobs require you to have a laptop. Now a days most of the work from home jobs, involves use of computer.

Although, it is not compulsory to have a laptop, as not every home job requires a computer or laptop.

3. LinkedIn and other networking sites

Having a LinkedIn profile is essential for most job seekers. Since, there are many job postings, which would ask for your LinkedIn profile.

Also, you should make profile in other networking sites like naukri.com and Facebook.

4. Personal website

Having a personal website may be helpful in showcasing your skills and online work portfolio, depending on your field and industry you want to work in.

Do that only if you are able to, as it is not compulsory to have your personal website. You can use this guide to create a personal website.

5. Two numbers

If you can, try to have two mobile number. You can use one for your work while the other for personal use.

Work from home jobs for moms

1. Freelance writing

It is one of the best option for every mom out there, since it doesn’t come with a lot of requirements.

If you love writing, sharing your experience and thoughts, this is the right job for you.

Let’s discuss a few ways in which you can write at home as a stay at home job:

1. Social Media Writing

There are many companies, which hire freelancers to write posts and handle social media accounts for the company. There are many opportunities in it for work from home jobs for moms.

This kind of jobs often require creativity, including utilizing images and other visuals to really grab the attention of those scrolling through their Instagram or Facebook.

2. Blogging

Have you ever noticed?, your mother or grandmother have information about things that even the internet doesn’t know. So, why not share it as content and start a blog?

Blogging is a great way to monetize your passion and writing skills and there are many opportunities in it for work from home jobs for moms. You can blog about things you are interested , which can help you earn a decent income while you are at it!

3. Copywriting

Copywriting is the about creating content for Sales and Marketing with the objective of generating sales and attracting more and more customers. There are many opportunities in it for work from home jobs for moms.

For example, advertisement, email, catalog etc.

The main purpose of copywriting is being an engaging and persuasive writer, which could open up many different opportunities for writing for different companies or online publications.

4. Article writing

Article writing involves writing informative, credible, and well-researched articles. You should have excellent writing, grammar, and research skills.

So, these are some ways, you can do freelance writing. There are many other ways too and some of them may be industry-specific.

7 popular sites specifically for home moms to work as freelance writers:

Freelancer writing, is considered one of the best work from home jobs for moms. As it a flexible job, so you can arrange your own schedule.

2. Virtual assistant

Virtual assistants are high in demand, these days. Stay at home moms who like to organize and preferably have some administrative experience.

The work of virtual assistants is to provide administrative support to an individual or team. Handling email and social media, maintain calendars, scheduling meetings and travel, planning events, and researching are some tasks you are required to do as a virtual assistant.

Skills you need as a virtual assistant

Good networking, communication and interpersonal skills.
Project management and organizational skills.
Word Processing skills
Proficient Computer skills
Quick decision-making

The best freelance sites for virtual assistant jobs:

Being a virtual assistant provide plenty of diversity and to stay at the top of the game, learn on a daily basis.

For moms looking to work and make as much extra money as possible, virtual assistant jobs are an excellent way of increasing income.

3. Data entry positions

One of the popular jobs for stay at home moms, data entry positions can be highly flexible jobs that allow you to manage your own schedule with your children by working while they are at school or while they sleep. You can work as a part time or full time job, as per your convenience. There are many opportunities in it for work from home jobs for moms.

You don’t need a bachelor’s degree, all you need is knowledge of computer and good typing speed.

Companies on which you can apply for data entry jobs

Avoid data entry scams: There are some scam sites, which offer data entry jobs. So, be careful while applying and never pay them, if they ask in the name of deposit.

4. Social media manager

In the 21st century, most of the people have a virtual presence and social media is the main reason behind it. So moms, if you’re good with social media and have some marketing skills, you could work from home as a social media manager. A social media manager is one of the trendiest work from home jobs for moms.

As a social media managers you will be responsible for creating and analyzing content for an organization’s social media pages. It’s one of the flexible jobs. The social media manager’s role serves to build brand awareness, engage with followers, and increase positive customer sentiment.

Knowledge about the following social media platforms is a must:

Twitter
Instagram
Facebook
YouTube
LinkedIn

Along with this, you will the following skills:

Writing: You should have good writing skills. When writing, you should be concise and have compelling writing that can fit into a brand’s story and engage an audience.
Creative design ideas: What kind of stock image will you use?, In What way the message is written?. These kinds of questions can affect the perception in which the customer perceives a company’s image.
Social media savviness: As I mentioned earlier, you need to have a good understanding of several social media platforms for good social media management.
Ability to adapt to change: Change is constant in the world of social media. You will be required to be adapted to changes like, new features, changing posting algorithms, new trending hashtags, etc.
Analytical skills: Knowing the target customers and how to attract them, requires an analytical eye and a capacity to research. Try to be familiar with social media analysis tools like HubSpot, Hootsuite, and Sprout Social.
Updated: You should be updated with the latest news or issues, related to company, to have a better understanding.

Companies That Commonly Hire for Remote Social Media Jobs

Now-a-days, so many moms are applying for it. As mostly, your schedule is 100% on your terms.

5. Transcription jobs

A transcription job is a professional typist job who listens to recorded or live audio files and converts into text format what they hear. They offer their services to the medical, legal, and general transcription industry.

A transcriptionist job is an excellent option of stay at home job for moms. You would be wondering, ‘why is that?’. Then allow me to explain you, why it’s the ideal work from home job for moms:

Flexible schedule

A freelance transcription job allows you to set your own hours. This will empower you to have control of your personal and career life. What’s the most advantageous thing about it is that, it’s totally up to you whether you prefer to work during the day or nighttime, when your kids are sleeping.

You can also decide when to take breaks. Transcription jobs relieve you from the pressure of a 9-to-5 jobs. You’ll be free to maximize family bonding and other priorities, as long as you don’t quit in the middle.

Employment opportunities

You don’t require a bachelor’s degree to get a transcriptionist job. As long as you possess the necessary skills, you will surely be able to generate superior outputs.

Work-Life Balance

A remote job of transcriptionist gives you a great opportunity of improving work-life balance. As I have mentioned before, for a transcriptionist job, you can set your own hours for work.

So, you’ll be able to focus on your work without sacrificing your personal time.

Minimal Equipment Investment

For a transcription job, all you need is a laptop or computer, a good pair of headsets and a reliable internet connection. Also, most of the companies provide transcription formats and software.

Control how your income

You can control your income by taking extra work which can give you some income security, as per your convenience.

It is considered a good job for supplemental income.

Some of popular types of transcription jobs:

Medical transcription
Legal transcription
General transcription
Academic transcription
Sermon transcription
Business transcription
Conference transcription
Market research transcription

You can choose the type of transcription, you want to work as and if you are confused go for general transcription. General transcription is the most preferred, especially when stay at home moms.

Skills you require as a transcriptionist:

Proficient in English and grammar.
Basic computer knowledge and familiarity with MS Word or other similar applications.
Strong listening skills.
Good typing speed.

With a career in transcription, you can work at your own pace and in a comfortable and productive environment.

So moms, if this sounds good. You should definitely give it a try.

6. Customer service representatives

A customer service representative interact with customers to handle complaints, process orders, and answer his queries.

Some of the most important Customer Service skills:

Communication skills

You need to have persuasive speaking skills. Persuasion has not only been recognized as an significant sales skill, but it can also be invaluable for your customer service.

If a customer contacts you, chances are it’s because he or she has a problem. But despite a customer’s anger or frustration, reps need to stay positive. They should have the ability to use positive language and steer the conversation towards a positive outcome.

Adaptability

People have different perspective and different ways of conversing. Also, they will use different ways of contacting, for example, email, messages or phone calls.

Luckily, a good CRM is equipped to handle this challenge by integrating ticket sources and making customer information available no matter what channel you’re using. That is why, reps need that mental flexibility to respond to a variety of situations in whichever way your customers prefer at the moment.

Effective listening and patience

You need to listen properly to the customer’s queries and have lots of patience to deal with their questions and problems.

Companies That Hire for Remote Work-from-Home Customer Service Reps

For mothers who are wanting to re-enter the workforce or transition into a career that allows them to work from home, this is a great job opportunity.

7. Online Teacher

If you need something, you can do now and not have trained for it, try this job!

Online teaching refers to the medium of imparting education through an online mode. It could be via email, live or recorded video, online boards etc. There are a variety of tools available that support people who are looking to impart education digitally.

With a new development era in technology, online Teacher/tutor had been one of the most preferred jobs, especially for mothers. You can choose the subject/ subjects, which you want to teach. There are many opportunities in it for work from home jobs for moms.

Skills Required to Start Online Teaching Jobs

In-depth knowledge of the subject
Flexibility in approach to cater to various age groups
Good communication skills
Active listening and ability to provide constructive feedback
Good curriculum planner
Familiarity with the course structure
Passion for teaching and tech-savvy

An online teacher’s job can play different roles, like:

K12 online tutors
College level faculty for online teaching
Online language teachers
Subject matter experts
Course developers
Instructional Designers

Companies That Hire for Online Teaching Jobs

Some Things you might need for online teaching jobs:

A computer
Microphone
Reliable and fast internet connection
A webcam
pen tablet

If you have a passion of teaching and also needed something that would be reliable and consistent week to week and pay more than $8 an hour, this is the job for you!

8. Web Designer

Web designers are responsible to plan, create and code web pages and websites, many of which combine text with sounds, pictures, graphics and video clips. It is a very good option of work from home jobs for moms, who have the required qualification.

A web designer is responsible for creating the design and layout of a website or web pages. Web designers can often work from home and can find freelance and flexible schedule roles.

Qualifications for a web designer

1. Master’s or bachelor’s degree in one of the following field

Computer science
software engineering
multimedia web design
information technology
web design
digital media production
graphic design

2. Diploma or certificate courses can also be pursued

The salary of a web developer is dependent upon education and experience. For moms, who have the qualifications should definitely do a job as a web designer.

Between the income potential, how flexible the projects can be, and the fact that you are doing meaningful work that is helping other business owners will help you feel content with your career choice.

There are many more online jobs like graphic designer, interior designer, life coach etc. and many more corporate jobs and other jobs for work from home moms.

Pros of having a remote job for mothers

Good source of income: Online jobs are really the most convenient and good source of income for mothers. So, work from home jobs for moms, is a nice way of earning some additional income.
You’re there for your children: You can keep a watch over kids while working, and that is the main purpose of your online job search. Having a parent at home, from a child’s infancy to middle school has been shown to be extremely beneficial to children. That is how work for home jobs for moms are convenient working opportunities.
Escape from office politics: From dressing right, to dealing with gossipy colleagues, breaking away from the politics of office can make your life extremely liberating.
Money saved on childcare services: The cost of childcare is extortionate, but because of work from home opportunities you can negate these costs completely, saving your family a small fortune every year.

Cons of work from home jobs for moms

Many people who work from home find that they are more productive in their offices than their homes. ome environment, it can be difficult for some moms to do both, keeping eyes on children and doing the office work.

You can feel a little trapped: You’re there for your children when they need you, but then, of course, you’re always there. It can sometimes be very tiring to do both, dealing with your kids and doing work. You have to do everything yourself, from making coffee to cleaning your workspace, in addition to taking care of your home and children.
Health issues: Dealing with two things at the same time can be stressful and can lead to health issues, so you have to be careful with your schedule and take proper intake of healthy food.

Mothers are like superwomen, if they want, they can achieve anything in their life. So, if you are a superwoman for children, don’t be hesitant to give yourself a chance, to show your capabilities and for yourself and your family. Try these work from home jobs for moms.

There is a common saying that if you don’t love what you do then you won’t be able succeed no matter how hard you try. Treat every day differently and watch out for your steep learning curve.

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7 Best Benefits Of Having A Tax Attorney For Your Small Business

Are you a sole proprietor or business owner? Have you ever thought of hiring a tax attorney?

You have worked hard to start your own small business. You won’t feel pleased, if your efforts were to go to waste, right?

That’s the reason your business needs a tax attorney. Many sole proprietors and business owners don’t think about hiring a tax attorney or a tax lawyer. You may be hesitant to hire one, but hiring a tax attorney or tax lawyer can be one of the wisest things for your business.

Many of you may think that all you are an accountant in the tax season, but that may not be a good decision. ‘Why?’, you must be thinking. So, here in this post, we will talk about why it’s good to have a tax attorney and how to choose one.

What Are Tax Attorneys

Before we talk about why you need a tax attorney, let’s discuss what exactly is a tax attorney.

A tax attorney is like a tax professional who specializes in the interpretation and application of tax laws and policies. Tax attorneys can offer you a wide range of services and that includes preparation and filing of your taxes.

Tax attorneys guide and advise clients on different tax topics. They help their clients navigate and comply with the complex tax law and how to legally take advantage of the deductions, exemptions and credits. They can also represent their clients in the tax court relating to any tax disputes.

Tax attorneys advise clients about the tax implications of estate planning, undoing property liens and acquisitions, business transactions, and the different structures of businesses.

Many tax attorneys are also Certified Public Accountants (CPA). Tax attorneys who are also CPAs are ideal for situations that involve both complex accounting and legal tax matters.

Benefits Of Having A tax Attorney For Your Business

Here are reasons, why you should get a tax attorney or tax lawyer for your business:

1. Prevent Legal Mistakes

As a sole proprietor or a small business owner, you can make a lot of mistakes unknowingly. Sometimes, these kinds of mistakes can result in a lot of pitfalls and can even act as a stumbling block in your business journey. A tax attorney can help you avoid such mistakes. This will help you save a lot of time and money, at the same time, get you complete peace of mind.

2. Protecting Your Intellectual Property

Many startups and businesses start because they’ve created a product or service that is new and unique to them. You need someone to help you apply for a patent or trademark to make sure your trade secrets and copyrights are confidential.

The worst thing that can happen to you is a copycat business opening and discovering you inadvertently made a mistake that allows them to steal your intellectual property. There are also other aspects of your business that need protection, for example, your business name, logo design or your business taglines.

A tax lawyer keeps you safe from copycats trying to steal your hard work. If you discover someone using your name or products, a tax lawyer knowledgeable in business law can help you sue them to stop selling the product and introduce legal action if they don’t.

3. Tax Payment When They Come Due

One of the most obvious benefits of having a tax lawyer for your business involves telling you when and how to pay taxes as they come due. The amount and types of taxes you have to pay will depend on factors like the scale, type (sale of goods or services), size and location of your business. Often, you may even have to pay some taxes like an employee tax, every quarter even though you do not have any employees working under you.

However, a tax lawyer can advise you on how to file and pay state and federal taxes, along with taxes that are charged by the municipal corporation, county, or city where your business is located. Lawyers can also advise you, what tax documents to use and file and what verification will you have to submit along with your business’s tax returns.

Another benefit of hiring a tax attorney is knowing when to file and pay your taxes. You might owe them every quarter, or the Internal Revenue Service (IRS) may allow you to pay them annually. Your tax attorney will tell you what the deadlines are for filing and may help you obtain an extension if you require so.

4. Avoiding Penalties And Interests

As I mentioned above, a tax attorney can help you with getting an extension for tax filing or payment and tax laws related matters. Obtaining a tax-filing extension for your business can be important if you want to avoid costly Internal Revenue Service (IRS) penalties and interests on your tax debt.

If you fail to file a tax return on time or leave out crucial information on your tax returns, this could delay the processing of your taxes. Because of this, you could incur fines or penalties, and additional interest on what you already owe to the Internal Revenue Service (IRS).

When you have a tax attorney, you can get the help that you would require with filing on time and submitting all of the documents required to prove your income and expenditures. Your tax attorney can also act as a link between the Internal Revenue Service (IRS) and you.

Tax attorneys can answer letters and phone calls from the Internal Revenue Service (IRS) and handle any tax disputes or tax controversy that might arise with tax authorities and potentially end with you being fined or penalized.

5. Tax Deductions And Exemptions

You as a business owner have the right to claim tax exemption and tax deductions, which you are legally entitled to take. Even so, you might not be fully knowledgeable about what they are and how you can claim them on your tax return. That’s why you need the help of a tax attorney to take advantage of the many available business deductions and exemptions. A tax attorney can help you optimize your deductions.

Tax lawyers can identify what exemptions and deductions you can claim and make sure they are utilized lawfully. Some of the expenses you can deduct from your taxes include:

Plant and machinery purchase
Depreciation
Capital expenditure u/s 35AD
Equipment purchases
Insurance Premium
Employee benefits like bonuses and commission

Your tax attorney would also make sure that you do not claim expenses like:

Income taxes
Traffic tickets
Payments in cash except for some exceptions
Payments in the form of interest, royalty etc.
Personal expenses
Expenses are used to determine the cost of goods sold

These deductions are disallowed for you to claim. Tax attorneys can help you make sure they are omitted from your returns.

6. Handling Business Contracts

Tax lawyers can be valuable allies when it comes to handling business contracts. For example, if you want to negotiate new contracts for your business, you might want your tax lawyer to review them to make sure you avoid taking on useless expenses.

So, if you have plans to renew or modify your contracts relating to your business, you should let your tax lawyer check them before you sign any of them. Their assistance can help you avoid taking on a tax burden you cannot afford and cannot escape because of the legalities found in the contracts.

Tax attorneys can also come in useful if you plan on acquiring or selling a business. These transactions most of the time come with taxation implications for you as the proprietor or business owner. Your attorney can help you make sure your tax burden is low and you avoid taking on a tax debt that legally belongs to the other party in the transaction.

7. Tax Planning

A lawyer with a taxation background can also help his/her clients with tax planning and tax representation. The most difficult part of being a small-business owner is to defend themselves against tax litigation and complicated tax situations, which they can often avoid if they would use tax lawyers from the start.

The tax attorneys can help you design an optimal tax plan to minimize or even eliminate taxes for your business.

8. Defending Your Case

There are many cases when a businessman is suspected of breaking a tax law. So, what would you do in that case, well obviously hire a lawyer. But not all lawyers are helpful in taxation related matters. That is why, one should look for a tax lawyer, in such cases.

Sometimes, the mistake can be intentional, whereas it can be unintentional because of a lack of knowledge or some error or omission. But in case you do one of the following, these actions will be considered illegal:

Making false entries or keeping two sets of books.
Hiding or undervaluing your income.
Claiming false deductions or exemptions, using false evidence.

How To Select A Good Tax Attorney

What to look for in a tax attorney? Here are some things you should watch out for while hiring a tax attorney:

License

Clients should insist on seeing and verifying attorneys’ licenses before hiring them. Every attorney ought to have a law license to practice law. You can also verify whether a tax lawyer has a license to practice law in your city and state by searching your state’s bar association website.

Education

Signs of advanced education. In many places, you should be a graduate of law school to get a law license. Some tax attorneys have a master’s degree in taxation. Nowadays many tax attorneys also have a CPA license, which means they can also work as certified public accountants. Lawyers who are also CPAs, are more helpful and preferred in many cases.

IRS Specialization

Tax attorneys who handle Internal Revenue Service (IRS) related issues and tax controversies are familiar with the agency’s inner workings. Interacting daily with tax practices and IRS offers gives them unique insight in handling a variety of issues. Clients should consider these experts as great assets.

Research

Many of these lawyers have websites. Doing thorough research on such sites can reveal their experience levels, office location, licensure, and many other important details about potential lawyers available for you to hire.

Analyzing customer reviews of the prospective attorney is also crucial. Customers who have received their legal services usually leave their comments on online sites.

Preparer Tax Identification Number (PTIN)

Anybody who prepares tax returns for their clients in exchange for compensation must have a Preparer Tax Identification Number (PTIN). The preparer must sign your tax return and provide a PTIN.

Consider Professional Organization Lists

Tax Law Association and the National Association of Tax Professionals are some organizations that provide important lists of tax lawyers or attorneys. The associations only register lawyers who are qualified, experienced and reputable lawyers. Their websites contain directories, which provides the searches that help people find experts who handle specific legal and tax issues.

How Much A tax Attorney Costs

Usually, legal work isn’t cheap. The attorney’s length of experience also affects the figure to move higher or lower.

In general, tax attorneys usually charge either an hourly rate or a flat fee for providing their services.

Flat Fees

Flat fees are a one time charge regardless of how many hours the lawyer spends on your tax case. Not many attorneys use flat fees, occasionally, on simple or routine matters.

Hourly Rate

The majority of tax lawyers charge by the hour. Every attorney charges a different hourly rate, but most rates are between $200 to $400 per hour. Highly experienced attorneys or attorneys working in big firms in large cities can charge more than $1,000 per hour.

Which is better? Well, it depends on the total cost as well as the qualification and experience of the attorney.

How To Get Free Legal Help

You might be able to get low cost or sometimes free help from a tax attorney or lawyer by visiting a low-income tax clinic, known as a Low Income Taxpayer Clinics (LITC), in your area (if there is). Low-Income Taxpayer Clinics (LITC) represent people who are small businessmen or sole proprietors who have income below certain levels and who need to resolve complicated tax situations with the IRS. Low-Income Taxpayer Clinics (LITCs) can represent clients in auditing the books of accounts, appeals and tax collection disputes before the IRS and in tax court.

LITCs also provides information about taxpayer rights and responsibilities in many languages for those individuals who can speak English as a second language. Low-Income Taxpayer Clinics (LITC) can also help people respond to IRS notices or fix account problems. To locate a local clinic, you can use the Taxpayer Advocate Service website.

So, if you are a small business owner or a sole proprietor, try to hire one. It can be helpful for your business and yourself.

10 Best Methods To Calculate Business Valuation

‘Business valuation? Why must I find the value of my business?’, will be the first question you will be asking yourself while reading this blog post.

Business valuation is calculating the economic and monetary value of a business. Business valuation is an essential requirement. Although there are professionals who can calculate it for you, business valuation can be calculated by yourself as well.

How to calculate business valuation — Image by Frimbee/ Unsplash

4 Reasons You Need Business Valuation

From a small business owner to a large scale company, there can be different reasons for having a business valuation.

Some reasons are stated below:

1. To sell or purchase a business

When you sell or buy a business, you need to know the worth of it. When you sell a business, you need to be certain that you get what it is worth. That’s where you need a business valuation.

Similarly, when you buy a business, you need to know its market position, potential income, fair market value, and other factors. So that it’s worth your investment.

Business valuation — Image by Scott Graham / Unsplash

So, don’t estimate the value of your business or pluck numbers from thin air. Hire a good chartered business evaluator to evaluate your business.

2. Making Well-Informed Decisions

A business owner or a company’s management may want a business appraisal to help decide the short-term and long-term strategies.

Therefore, having a business valuation will provide you with clear information that will help you make better business decisions.

3. Position Of Business In The Market

Knowing the position of your business in the industry and other similar businesses in the same industry can be used as a measure for performance evaluation and making strategies.

4. Entrance To The Capital

When you seek additional funds for business growth or save it from the crisis, the investor will want to see a full business valuation report. An investor would like to invest in a business with a high business value, and these values represent satisfied existing customers, good sales revenue, the higher current value of the company/business, high net cash and a good company’s management.

Business valuation is the first step in the process of securing a potential investor.

These are some of the general reasons for determining a business valuation. Ascertaining the market value of your business can help in areas like financing, taxation, liquidation, business sales, partner exits, public offerings, or dispute settlement such as divorce proceedings.

What is a business valuation?

A business valuation is a process and a set of procedures for determining the economic value of a business or company unit.

Business valuation can be used to determine the fair value of a business. An accurate business valuation can help in several situations.

Basics Of Business Valuation

Business valuation is a topic frequently discussed in corporate finance. It involves determining the current worth of a business, using different measures for evaluating all aspects of the business.

A business valuation also includes an analysis of the business’s discounted cash flow, the company’s capital structure, its future earnings prospects, or the market value of its assets.

Business valuation has a complex set of rules and it requires knowledge of valuation techniques, factors driving value in the industry, accounting standards and laws related to it, and a good understanding of the subject business or company.

The tools used for valuation may vary among evaluators, businesses, investors and industries. The most common approaches to business valuation include reviewing financial statements, earning approach models, and similar company comparison approaches.

So, this is all basic knowledge you must acquire to value a business.

How To Calculate Business Valuation?

To calculate a business valuation, you first need to identify the purpose of the valuation, and selecting the proper standard of value to use is critical to arriving at a fair, reasonable, and defensible value.

1. Determine The Basis Of Value

You first need to ascertain from whose perspective you are going to calculate business valuation. The basis of value refers to a consideration of the type of value being measured and the perspectives of the parties involved.

From whose perspective are you calculating business valuation? It can be from the point of view of a seller or buyer, an investor or any such other party to a transaction.

Sometimes, it can be difficult to determine the basis of value, because of the involvement of other factors, which can affect your decisions. That is why, the basis of value is mostly specified by law and regulations, agreement or contract, and may be used for valuation.

2. Determine The Premise Of Value

The premise of value can be determined by the purpose of the valuation and the basis of value.

Generally, it will fall in one of the following categories:

Premise of a going concern

This premise assumes that the business will continue running normally using all of its assets to produce income. A company should always be considered a going concern unless there is a reason to believe that it will be going out of business soon.

Orderly liquidation premise

This premise is quite the opposite of the “going concern” premise. In this valuation premise, the assumption is that the business assets will be operated or sold individually or as a group and the company will not continue operation.

Forced sales premise

This premise refers to circumstances where you are under compulsion to sell and where, as a consequence, proper marketing is not possible and the buyer may not be able to undertake adequate due diligence.

The price obtained in these circumstances will depend upon the nature of the pressure on you and the reasons why proper marketing cannot be undertaken. Due to which the price obtainable in a forced sale cannot be realistically estimated.

The premise of value shall reflect the facts and circumstances underlying the asset to be valued as well as the purpose of business valuation. The premise will have an impact on the other factors of business valuation, such as valuation approaches, methodology, bases, and such other factors. The premise of value shall be mutually agreed upon by the chartered business valuator and the client for business valuation.

3.Gathering Data Relevant For Business Valuation

A list of some types of records and data required for business valuation:

Financial records

A well-documented financial record allows appraisers to estimate future cash flow and profits. A company’s balance sheet and statement of profit and loss are the most important records to be maintained by any business. Financial records are also vital for calculating growth rates. Small businesses and startups with high growth prospects tend to receive higher valuations.

Competitive advantage

It refers to the attribute that allows an organization to outperform its competitors. If this advantage can’t be maintained over time, the business’ valuation may fall low.

Business assets

Intangible assets like patents, trademarks, and customer relations can boost business valuations. Although it may be hard to put a figure on these assets, their impact is significant.

Also, tangible assets like tools, business premises, plants and machinery need to be taken into account, and their value can be easily calculated. Depending on their volume and quality, tangible assets can boost business valuations.

Size of business

Larger companies usually have higher valuations than their smaller counterparts because of greater income streams. Big businesses also tend to have easier access to capital in comparison to small businesses. They are also less impacted by the loss of key leaders.

All this data mentioned above, as well as contracts, customer/supplier agreements, leases, loans, and all other obligations that will impact future business profitability, will need to be analyzed. All these records should be compiled by the client and provided to business appraisers.

4. Review The Past Performance Of The Business

It is important to understand the company’s history, ownership structure, and past financial performance. This would allow us to compare the business valuation data of other companies in the same industry of similar maturity and size.

The performance of the subject company relative to similar companies is established by comparison to the similar companies’ dividend payout ratio, price to earnings ratios, price to book values, and price to free cash flow metrics.

5. Determine The Future Outlook Of The Business

The future outlook of a business is one of the most important factors. To determine the future value of a business, it’s necessary to first understand the company’s current strategy and performance. From this understanding, it’s possible to make estimates and forecasts of future revenues and expenses, market share, operating expenses, taxes, capital requirements, and cost of capital.

6. Determine The Valuation Approach

There are numerous business valuation methods. You’ll learn about several of these methods/approaches and you will have to choose one from the list given below:

1. Market Capitalization (Market Value)

Market capitalization is one of the simplest approaches to calculating business valuation. It refers to the total market value of a company’s outstanding shares of stock.

Market capitalization is an easy and quick method for estimating a business’s value by extrapolating what the market thinks it is worth for publicly traded companies. In such a situation, simply multiply the share price by the number of available shares.

The formula for calculating business valuation through the market capitalization rate is:

= Current market price of share * Total no. of outstanding shares

It can be noted that this method only works for publicly traded companies, where share values can be easily determined.

A major limitation of this method is that company valuation is subject to market fluctuations. If the share market declines due to its various external factors, the company’s market capitalization will decline despite its financial health.

Market capitalization relies on investor confidence and is therefore volatile and an unreliable measure of a company’s true value.

2. Earnings Multiplier

The earnings multiplier also called the price to earnings ratio, is a method used to compare a company’s current share price to its earnings per share (EPS). The earnings multiplier can be used to know about a company’s financial health. It is a valuation tool used to compare the share price of a company with that of similar companies.

The earnings multiplier can be used to compare several companies while making an investment decision. The earnings multiplier helps in calculating the return an investor will get against the invested amount by him. A company’s share price depends on various factors, especially the future market value, as it shows the scope and position of the company issuing the shares. It also shows the performance of a company compared to its competitors in the same industry.

The formula for earnings multiplier is:

= Price per share / Earning per share

Types Of Earning Multipliers

Forward earning multiplier

The forward earning multiplier, or P/E ratio, divides the current share price of a company by the estimated future earnings per share of that company. For valuation, a forward P/E ratio is typically considered more relevant than a historical P/E ratio.

The formula for the forward P/E ratio is:

= Current share price/ estimated future earning per share

Trailing earning multiplier

The trailing earnings multiplier, or P/E ratio, is calculated by dividing the current value of market or share price, by the earnings per share over 12 months. It estimates a company’s likely earnings per share for the next 12 months.

The earnings multiplier can be high or low due to the different reasons relating to its growth or share price.

3. Discounted Cash Flow Method

Discounted cash flow (DCF) is a method of business valuation used to estimate the value of an investment based on its expected future cash flow. Discounted Cash Flow analysis attempts to figure out the value of an investment in the present time, based on projections of how much money it will generate in the future.

The DCF method finds the present value of expected future cash flows using a discounted rate. Investors use this concept of the present value of money to determine whether the future cash flows of an investment or project are equal to or greater than the value of the initial investment.

The given opportunity can be considered only if the value you calculated through DCF is higher than or equal to the present cost of investment.

Calculation of DCF involves three basic steps :

Forecast the expected cash flows from the investment.
Select a discount rate, typically based on the cost of financing the investment or the opportunity cost presented by alternative investments.
The final step is to discount the forecasted cash flows back to the present day, through a financial calculator, a spreadsheet, or a manual calculation.

The main limitation of the discounted cash flow method is that it requires many assumptions, which can result in less accuracy of the valuation.

4. Liquidation Value

Liquidation value is defined as the net value of a company’s physical assets if it were to go out of business and the assets had to be sold. This is the value of the company’s property, plant, and equipment. Intangible assets are not included in the company’s liquidation value.

There are generally four levels of valuation for business assets :

Market value

Book value

Liquidation value

Salvage value

Each level of value provides a way to classify the aggregate value of assets. Liquidation value is especially important in the case of bankruptcy and the closure of a business or company. Liquidation value is generally lower than book value, but higher than salvage value.

Liquidation value is calculated by removing the value of all assets and liabilities of a company from its financial statement. The subtraction of liabilities from assets will result in the liquidation value.

5. Book Value

Book value, also known as net worth, is total assets minus total liabilities. It can also be defined as the value of shareholders’ equity of a business as shown on the balance sheet of the financial statement.

The formula of book value:

= Total assets – Total liabilities

A major issue with this method is that companies report the figure quarterly or annually. So, it is only after the reporting that an investor would know how the book value has changed over the months.

6. Times Revenue Method

The time’s revenue method is a business valuation method used to determine the maximum value of a business. The time’s revenue method is most appropriate for new companies or startups with earnings that are either non-existent or very volatile.

Business valuation is done by calculating a floor (the lowest price) and a ceiling (maximum price) that an individual is likely to pay. Through this, you can determine the value an individual is willing to pay to acquire the business.

The time’s revenue method is not always a reliable method of determining the value of a business. This is because revenue is different from profit. Therefore, an increase in revenue does not necessarily mean an increase in profits.

7. ROI valuation

ROI stands for return on investment and is a performance measure used to evaluate the efficiency or profitability of an investment or compare the efficiency of different investment opportunities.

ROI is calculated by deducting the initial value of the investment from the final value of the investment, then dividing this new number by the cost of the investment, then finally, multiplying it by 100.

It is a key figure for businesses that want to know whether they are in the red or the black. ROI calculates, how much you have invested in the business and how much you can gain from the sale of the company. You need to know the current market value to make this calculation. Through ROI, you can assign an estimated value to your company/business if brought to sale.

A disadvantage of ROI is that it doesn’t account for how long an investment is held.

8. Relative valuation

This method of business valuation deals strictly with how much money your company would bring in if it were sold on the market.

With this valuation method, in this method, you compare every asset controlled by the business to similar assets. The value determined through this method gives you an estimated starting price for negotiations.

9. Asset based approach

This approach relies on calculating your business’s worth based on its assets. An asset-based valuation is a form of valuation in a business that focuses on the fair market value of the business.

The asset-based valuation approach is usually preferred because it provides flexibility to its users regarding the interpretation when you have to make a decision relating to assets or liabilities while considering the business valuation.

Methods in the asset-based valuation approach:

Asset accumulation method: In the asset accumulation method, all the assets and liabilities of a business are compiled, and a value is assigned to each one. It has a very similar structure to that of a balance sheet.

Excess earnings valuation: It is a combination of the income and asset valuation methods. It can also be used to value a company’s goodwill.

One of the limitations of the asset-based approach is that it disregards a company’s prospective earnings.

10. Comparable analysis value

A comparable analysis value method is a process used to evaluate the value of a company using the metrics of other businesses of similar size in the same industry. It is a relative form of valuation, unlike discounted cash flow (DCF) analysis, which is an intrinsic form of valuation.

The most common valuation measures used in the comparative analysis are:

Enterprise value to sales (EV/S)

Price to earnings (P/E)

Price to book (P/B)

Price to sales (P/S)

It helps in determining whether it is overvalued or undervalued. If the ratio calculated is high, then it is overvalued and if it is low, then the company is undervalued.

Business Assets And Internal Revenue Service (IRS) In Business Valuation

On July 27, 2006, the latest version of the IRS Business Valuation Standards.

Since valuation is important for tax reporting and business assets, standards have been set for IRS. According to the Internal Revenue Service (IRS), a business is required to be valued based on its fair market value. Taxation related events like the purchase or sale of shares, gifting shares or transferring shares to a successor, are ought to be taxed depending on its valuation.

Therefore, the valuation of business assets is linked with the standards of internal revenue service (IRS).

Should You Hire An Appraiser

If you are a small business owner or startup, you’ll likely be able to obtain all of the raw data you need to conduct your business valuation. While this may be feasible, you should determine your business valuation, only if it’s for your knowledge. If you need a business valuation for anything more than that or any reason mentioned above in the article, you should hire a professional business valuator.

But if we are talking about a company or a large scale business, one should hire a professional evaluator to get a valuation. As it would be really helpful for the future performance and future earnings.

Business valuation is thus an important aspect of your business. Which approach/method is the best? It depends on the purpose and other factors of valuation. Although the earning value approach is the most popular, one can use a combination of business valuation methods to identify and set a selling price.

But ultimately, valuations aren’t permanent. They can rise or fall depending on the circumstances. But as long as businesses deliver value to their customers and produce quality products, those efforts will eventually translate into a higher business valuation.

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