When it comes to valuing a partner’s stake in the business, valuation of the business as a whole is the first step. The next big question is how to allocate this business value among the partners. You may think that that the total business enterprise value should be divided in proportion to the partners ownership… Continue Reading
The numbers of the baby boomers reaching retirement age keep growing. And there is one skilled services sector that is sure to flourish – home health care. Indeed, home health care services, classified under SIC code 8082, have been experiencing rapid growth recently. As a result, there are excellent opportunities for differentiation since a business… Continue Reading
We talked about the factors that create personal goodwill in small businesses and professional practices. The key takeaway is that personal goodwill is associated with the individual practitioner, not the business organization. In contrast, institutional business goodwill arises from the business or practice itself. This is the type of goodwill that you can transfer easily when the… Continue Reading
Business goodwill valuation comes up often in the context of valuing professional practices and consulting service businesses. The typical examples are medical, dental and other healthcare practices, CPA and law firms, engineering and architecture consulting businesses and other professional service companies. A key question you may need to address is how much of the practice… Continue Reading
Auto tire retail stores, classified under SIC code 5531 and NAICS 441320, represent around 19,000 establishments in the US alone. Over two thirds of these businesses are small, owner-run single store operations. Check these interesting facts: while the industry as a whole generates over $77bn in revenues, the average store makes around $1,500,000 in annual… Continue Reading
If you are looking to have a business appraised hiring an appraiser is one of the ways to do it. As with any professional engagement the question of costs comes up rather quickly. Not surprisingly, professionally prepared appraisals don’t come cheap; the average hourly rates these days are around $300. A well-done business appraisal takes… Continue Reading
If you are looking at valuing an owner-operator managed small business, then the Multiple of Discretionary Earnings business valuation method should be high on your list of priorities. One of the best examples of the so-called direct capitalization valuation methods, this method determines the value of a business as a multiple of its discretionary cash flow.… Continue Reading
If you ever tried raising debt capital from a bank, you know that lenders base their decisions on business cash flow. In other words, the key consideration is whether the business can repay the loan in full and on time. Lenders build in the risk into the debt service coverage ratio. This gives the bank… Continue Reading
If you own a car wash business or looking to buy one, here is a piece of good news: car washes are one of the most profitable sectors of the service industry with above average profits. These businesses are known to generate steady income due to the necessary and recurring nature of the service they… Continue Reading
Perhaps the greatest advantage of the renowned Discounted Cash Flow business valuation method is its flexibility. You can choose any stream of business income and discount it to determine the business value today. However, to get accurate business valuation results, you need to match your earnings and the discount rate carefully. Net cash flow and… Continue Reading
Companies large and small often realize that they cannot be all things to all people. A business may excel at product development but have little experience in providing specialized services to its customers. A company may have an established position in a regional market place, but lack resources to enter a larger national or international… Continue Reading
Construction companies are frequent business acquisition targets. The volume of business sales is largely due to the industry size – there are over 346,000 firms in the single-family housing construction alone, classified under SIC 1521 and NAICS 235510. While this construction industry segment generates over $196 billion in annual sales, the average construction company is… Continue Reading
If you are buying a business or selling your business, estimating the business selling price by market comparison is a good idea. Recent business sales in your industry offer an excellent way to develop your asking price or check your offer price and terms. A number of business pricing multiples to choose from As we… Continue Reading
If you need a bullet-proof way to show what your business is worth, compare it to similar businesses that sold recently. In fact, such business market value comparisons are widely used by business people and professional business appraisers. So much so, that they deserve an official name: Comparative Transaction business valuation method. Market comps and business fair… Continue Reading
Perhaps the most misunderstood part of valuing a business is that business valuation results may differ depending on the assumptions you make, namely: Who needs to know what the business is worth? What are the circumstances surrounding your company valuation? Business appraisers use the formal term business value standard to address this situation. You have… Continue Reading