In the US alone, business owners and managers spend over $1 billion a year to determine the value of businesses and professional practices. So what prompts business people to conduct business valuation? Here are the most common reasons: Buying or selling a business Business acquisition is perhaps the best known reason to value a business. If… Continue Reading
If you are in an industry where businesses sell often, chances are there is plenty of data to estimate your business value by comparison with similar businesses. A common way to do so is to use the so-called pricing multiples. These pricing multiples are ratios which relate some measure of business financial performance to its… Continue Reading
If you are valuing a company that is going through a period of rapid growth, the Discounted Cash Flow business valuation method should be high on your list of choices. Using this key income-based business valuation method, you can get very accurate results. This is because the discounted cash flow business valuation lets you capture the company’s… Continue Reading
If you expect that your business valuation results will be reviewed by tax authorities, you may need to prepare a business appraisal report that meets several key requirements. In the US, for example, the Internal Revenue Service has published the Revenue Ruling 59-60 in 1960. This central publication outlines a number of requirements that a business… Continue Reading
Ask any seasoned business appraiser and you will hear: there are three ways or approaches to measure the value of any business, large or small. True, but there are some big differences between a small privately owned business and a multi-national giant. To get an accurate small business valuation you need to keep a few key… Continue Reading
Retail industry is very large and its well-being is essential to the health of the overall economy. As an example, the retail market segment represented by the US department stores, SIC 5311 and NAICS 452111, has over 3,500 establishments generating just under 76.9 billion dollars in annual revenues and employing more than 534,000 people. Retail businesses… Continue Reading
You can measure the value of a manufacturing firm using a number of well-known methods. Importantly, all of these fall under the market, income and asset approaches to business valuation. However, to get accurate business valuation results you need to focus on two key points. 1. Identify and include all income-producing assets in your manufacturing company… Continue Reading
Food service is big business. In the US alone, over 570,000 eating and drinking establishments generate nearly $375 billion in annual revenues and employ some 6.8 million people. The industry landscape is increasingly dominated by regional or national chains which account for more than 70% of the market. Yet the average restaurant grosses $1,200,000 and… Continue Reading
If you are looking at a business valuation result that just doesn’t make sense, chances are there is a mistake. An error can creep into your business valuation in a number of ways. Here are the top ones to watch out for – and avoid when valuing your business: 1. Choosing the wrong type of business value. Business… Continue Reading
Business people often disagree about business valuation results. Given the amount of money at stake, it is not surprising that the parties tend to view what a business is worth from different points of view. Consider these common situations: Business sale The business seller wants to maximize the selling price and looks to support a higher business value.… Continue Reading
Does professional practice valuation differ from other business appraisals? Consider this: Professional practices come in many types: dental and medical practices, law and accounting firms, architecture and engineering consulting companies, individual and business professional consulting firms. While a professional practice may look like a service business, there are key differences to bear in mind that… Continue Reading
Why do you need income statement and balance sheet adjustments before valuing a company? Because the “cost-basis” accounting statements such as the company’s Income Statement and Balance Sheet require adjustments before you can use them in business valuation. Your goal here is to demonstrate the business earning power and economic value of its asset base.… Continue Reading
Small business value is driven by its earning power It will come as no surprise to you that the value of a small business depends on how much money it makes. More so than the market comparisons or the size of the business asset base, its ability to generate adequate income for its owners defines what it’s… Continue Reading
With all the business valuation methods available, you may wonder which ones work best for valuing a start-up business. First, let’s consider the special challenges faced by a young business that affect what it is worth. Conflicting requirements for start-up valuation Unlike an established business, startup companies have little history of financial performance. Frequently a young… Continue Reading
You will hear this advice time and again – if you need to get a solid business valuation, roll up your sleeves and use the Discounted Cash Flow method. Used by professionals to value businesses small and large, this income-based business valuation method has become the de facto standard for precise business valuation. When you use this powerful… Continue Reading