When you value a business, you usually focus on valuation of the entire enterprise. For example, you will generally see such valuations if the owners put the company up for sale. In addition, business valuation comes up when the owners consider a transfer of ownership, or for investment purposes, whether debt or equity. Valuing a… Continue Reading
At one point or another most successful business people face a dilemma. Do I figure out the business value by myself or outsource the project to an outside appraiser? The decision may depend on the reason why you need the business appraised. Assessing strategic investments Consider a strategic investment opportunity where the owners offer all… Continue Reading
If you are interested in getting a high quality business appraisal but want the flexibility of choosing how it is to be done, then the recent AICPA SSVS No 1 standard is a good starting point. In addition to offering you a number of guidelines on how to value a business or professional practice, the… Continue Reading
It goes without saying that the best way to value a business is based on its earnings. But what about companies that currently do not generate income, e.g. due to a temporary closure? Surely, there is some value in all those assets the company controls? This is indeed the case. If the income stream is… Continue Reading
Risk and return go hand in hand in valuation of any business asset. When an investor puts money into a business there is expectation of being paid at some future point in time. However, the investor faces the risk both of losing the investment and foregoing a better opportunity somewhere else. So how can you… Continue Reading
As a general rule, the legal system is not the best place to determine business value. Even so, the courts are often called upon to provide a definitive answer. This happens if the value of a business is a matter of dispute. Some common cases are divorce, gift or estate taxes or property tax situations.… Continue Reading
Business valuation has traditionally been used to support a business selling price, resolve a legal dispute, raise additional capital and other situations. What is common to all these scenarios is that business valuation is used as part of the established business strategy: business people know what they want to do and need to determine business… Continue Reading
If you tackle valuation of a company with significant real property and fixed assets, there is a possibility that you can encounter environmental issues that require remediation. Most business appraisers are not experts in environmental engineering. What you can do is conduct an inspection of the business property. If there are signs of environmental problems,… Continue Reading
If you are using the discounted cash flow method for your business valuation, a key step is to calculate the terminal value. This is the residual value of the company assuming that it will continue operating beyond the earnings projection period. The idea is that you can predict business earnings only so far into the… Continue Reading
Considering valuation of an auto repair center? Some industry sector observations. General auto repair shops make up a large portion of the auto services industry. And given the number of vehicles on the road, this is no luxury business with customers needing either repair or maintenance on a regular basis. Independent auto repair shops are… Continue Reading
With all the choices of methods you have for business valuation the question is: which of the methods is the most accurate. In truth, the accuracy of your business appraisal depends mostly on your specific situation and the set of assumptions you make. In fact, the selection of business methods varies on the case by… Continue Reading
The discounted cash flow method gives you the most versatile way to handle valuation under the income approach. Professional business appraisers, venture capitalists, bankers and entrepreneurs use this method to value all kinds of businesses and professional practices. Just about any business with a solid expectation of future earnings can be valued by this powerful… Continue Reading
You may be confronted with the need to value a startup way before the traditional methods of business appraisal can be applied directly. A young company can represent considerable value despite current lack of earnings, uncertainty surrounding its unproven intellectual property assets, and little comparative data on which to base your value conclusion. Seasoned entrepreneurs… Continue Reading
If you are valuing a startup chances are the company has not yet established a strong track record of significant earnings. The good news is business valuation is about the future expectation, not historic trends. So it is far more important that you demonstrate the earnings upside as the company grows. That’s one reason startups… Continue Reading
Why should you consider forecasting size premium when valuing a small company? Consider this: You can value just about any company using a number of income-based business valuation methods. These methods require that you provide two key inputs: Estimate of business earnings, usually in the form of cash flow A factor representing business risk such… Continue Reading