If you are new to business valuation the new concepts and terminology may be confusing at first. Even for business people familiar with the financial information such as income statements and balance sheets, the language of business appraisal takes a little getting used to. The typical questions you may have are: What is business valuation?… Continue Reading
Whether you are an experienced business appraiser or new to business valuation, you will find plenty of helpful tips and suggestions with ValuAdder. The ValuAdder software comes with a full-featured Learning and Information Center integrated into the Help system. You can get a quick orientation on the business valuation process by simply clicking on the… Continue Reading
Before you can use any method for business valuation you need to prepare a number of key inputs that the methods require. Usually, you would start your analysis with a set of the typical business financial statements such as its income statements and balance sheets. But the accounting financial statements are just a starting point.… Continue Reading
One of the key business valuation techniques is comparing your business to recent sales of similar companies. This relies on the valuation multiples derived from business selling prices and financial performance measures of the companies sold. Usually, these multiples are based on the business earnings or asset values, e.g. revenues, discretionary cash flow, EBIT or… Continue Reading
Businesses may have a wide range of intangible assets at their disposal. One important type of such assets that tend to increase in value over time is databases and subscription lists. This is especially so if the lists are assembled one item at a time. Consider a customer database that grows as the business adds… Continue Reading
Under the accounting standards published by the Financial Accounting Standards Board (FASB) two deal with the way business goodwill is handled: SFAS 141 and SFAS 142. Business goodwill is put on the company’s books if management acquires another firm. Under the SFAS 141 and 142 goodwill is tested each year for impairment. This impairment occurs… Continue Reading
These days business people do their work on any computing platform they choose – be it a laptop, desktop or a mobile device. For serious business valuation work the two types of systems that come up most often in our experience are Windows and Mac computers and laptops. Often, your work may be done on… Continue Reading
Accurate inventory valuation should be high on your list of priorities. Some reasons why: One of the key business tangible assets, inventory is well understood by both business people and appraisers. Businesses determine the value of inventory to close the books on a regular basis. Inventory is a unique type of asset in that it… Continue Reading
To answer this question requires a judgment call. Each company needs to make a decision whether to disclose the values of its intangibles depending on its set of circumstances. Under the Generally Accepted Accounting Principles (GAAP) the firms should make available all information that helps investors and creditors understand and forecast future cash flows –… Continue Reading
In the US the Internal Revenue Service has laid out the expectations for what the tax authorities look for in business valuations. Here is the list: The nature of the business and its history The book value of the company stock and its financial condition The dividend paying ability of the firm The presence of… Continue Reading
Every business valuation relies upon a set of assumptions about how the economic environment will look some time in the future. Once the assumptions are made, the business appraiser can make forecasts for the business being valued. If you take a look at a typical business valuation report, there is usually a section outlining the… Continue Reading
You may have heard this: business value fluctuates as time goes on. Fair enough, but the question you may ask is what factors best capture this change? Here is our short list: Discount rate Capitalation rate Valuation multiples The reason these numbers are in a constant state of flux is that the marketplace conditions vary… Continue Reading
So why do you run across business appraisal result differences? You might think: if all business appraisers follow the standards such as USPAP and AICPA SSVS how come the results differ? The main reason is that clients influence the outcome of professional business valuations. Business people have a reason for business appraisals and an idea… Continue Reading
The discounted cash flow or DCF valuation method is perhaps the most widely used technique in income based business appraisals. If you take a look at the calculation, you will notice that it consists of two parts: A discounted forecast of future earnings over a finite time period A so-called terminal value calculation The idea… Continue Reading
You can see from our discussion of business valuation that there are a number of ways to determine what a company is worth. In theory the results you get by using the different methods should give you very similar answers. That often is indeed the case, yet the actual business values calculated with various methods… Continue Reading