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
If you are valuing an established business the capitalized excess earnings method is an excellent choice to determine the value of business goodwill. However, use care when specifying the rates of return as your results may vary considerably. The method uses not one but two rates of return to calculate the valuation results. One is… Continue Reading
One of the common questions in valuing businesses of different sizes we hear often: Are there differences in value between companies of different sizes? If so, how does the difference factor into business valuation? Size matters in business valuation The fact is that when it comes to business valuation, size matters. This makes intuitive sense… Continue Reading
If you are valuing a private company risk assessment is one of the key steps. Business value depends on the company’s earning capacity at a certain level of risk. The greater the risk, the greater the returns should be to justify the investment. This risk assessment is typically represented by the discount and capitalization rates… Continue Reading
You may ask: if all business appraisers follow professional standards such as USPAP and SSVS, then how can business valuation results be so different? The reason is that clients who order business appraisers have a number in mind beforehand. The client wants a certain result and is rarely content with just knowing the answer. There… Continue Reading
Are you are valuing a business by using capitalization of income methods? Then you may have to be extra careful in selecting the right capitalization rate. Now the cap rate is just the difference between the discount rate, which captures the company’s risk profile, and the earnings growth rate over the long term. Common valuation… Continue Reading
If you look at the public capital markets such as NYSE or NASDAQ, the day-to-day prices are for non-controlling business ownership interests, usually a small number of shares. In other words, these per share prices represent the minority price. If you want to acquire a controlling share of the company’s stock, you will have to… Continue Reading
One of the most pressing questions that keeps coming up in business appraisals is the difference between values of companies of different sizes. And anyone can spot a difference between a multi-million dollar corporation and a small main street shop. Ask a professional business appraiser about this. And you will likely hear about the risk… Continue Reading
You may have heard this said about running a business – cash is king. You will find that cash is also important in business valuation, especially when the calculations involve the income-based methods. The idea behind these valuation methods is to determine the business value based on its earnings generation capacity given a level of… Continue Reading
If the tools and choices confronting you in business valuation seem confusing, take heart – you can get through this by following a number of straightforward steps. Step 1: Gather the relevant data Just like any project, business appraisal requires that you take the time to plan it. So the first step is to gather… Continue Reading
As a business person or professional you may have an idea of what a business is worth. Other people you know and trust may have shared their opinion. Or you may have witnessed a sale of a similar company and noted the selling price. Most owners have a good idea of just how valuable the… Continue Reading
If you need to determine the value of a piece of machinery or business equipment, the market comparable method is the typical choice. The method is easier to apply than in valuations of other asset types such as real estate. Equipment models and makes are readily identified, the serial numbers give you the age of… Continue Reading
Even if you reside in the USA or Canada, your business valuation projects may require that you value a business outside of North America. You may have this question: do the valuation approaches and methods vary based on the business’s location? In fact it does not matter where the business is currently located. As long… Continue Reading
If you are preparing for a business sale or considering investing in an existing business the central question is: how much is the business worth? One of the most useful approaches to answer this question is to look at the current selling prices of similar businesses. Once you gather enough information on what these businesses… Continue Reading