Fundamental to the business valuation process is the need to make assumptions about future events. What the business is worth today depends upon future cash flows. These future business earnings are a function of business future performance, financially and operationally. Business value is about the future earnings and risk No matter how you slice it,… Continue Reading
If you are working on a business appraisal, a big part of the analysis is reviewing the industry outlook. In many ways, the industry in which the business competes is far more important than the general economic situation. If you are valuing a strong company in a growing industry, its valuation is likely to be… Continue Reading
When it comes to business valuation, forecasting the business future financial performance is one of the most challenging, yet necessary tasks. Business value is about risk and returns going forward. Assessing how well you expect the business to do is at the core of establishing its value. There are two ways to prepare the assumptions… Continue Reading
When you face a dispute, whether partner disagreement or legal challenge, the parties are usually wide apart in their expectations of business value. To bridge the gap, keep in mind that a reasonable estimate of the future business outcome is usually achievable. If you expect to be challenged on your business valuation, be sure you… Continue Reading
Sooner or later, this questions pops up for most business people. Whether you are selling or buying a business, hand the reins to a younger generation, seek investment to grow the company, or need to fend off legal challenges, the issue of business value comes up. Most business people have no clue about business valuation… Continue Reading
What? Does the value of business goodwill change depending on the amount of current liabilities carried by the company? It may not sound intuitive, but it actually is true. Consider the well known capitalized excess earnings business valuation method, the go to technique when valuing business goodwill. A trick question: how much capital is committed… Continue Reading
One of the well established business valuation methods, the capitalized excess earnings technique has a long and storied history. The method is described by the United States IRS in its Revenue Ruling 68-609. Unfortunately, the ruling does not specify what it means by the net tangible asset value, a key input into this valuation method.… Continue Reading
Take a look at a typical professional business appraisal report. You will see that a number of valuation methods are used to establish business value. In fact, all business appraisal standards, e.g. USPAP and AICPA SSVS No 1, require that you use all three approaches whenever possible. If you do not, you need to explain… Continue Reading
One of the key choices you need to make in your business valuation is the length of the financial forecasts. Some experts go as far as to project the business financials over 10 years into the future. In other words, the appraiser takes a leap of faith in order to predict the business earnings, expenses,… Continue Reading
If you look at business appraisals whose results differ significantly, the most common reason is the different assumptions. Consider, for example, the discounted cash flow valuation. If a lower discount rate is chosen by the appraiser, the resulting business value may be understated. On the other hand, an unreasonably low discount rate would lead to… Continue Reading
Time and again business people ask: which business valuation method is the best? The answer is, it depends. If the business operates in a market niche where many similar companies sell, the market approach methods are a good choice. You can easily support your business value conclusions by pointing to a number of recent business… Continue Reading
If you ever valued a private company, financial statements normalization or adjustment requirement should sound familiar. You need this key step in order to reveal the true earning power of the company. Because it’s an essential element which defines its economic value. Moreover, misstating the financial condition of a business could lead to big mistakes… Continue Reading
Take a look at a professional quality business appraisal, and you will notice that business value analysis is done three ways. These are called business valuation approaches: asset, income, and market. In addition, you will spot a number of methods each valuation approach offers. Business appraisers include a number of such methods into their business… Continue Reading
The key business valuation standard, USPAP (Uniform Standards of Professional Appraisal Practice) states that appraisers must be independent of their client and the business being appraised. Your appraiser cannot have any financial interest in your company and try to benefit himself or herself by coming up with a specific figure. Think about it, would you… Continue Reading
Companies developing a variety of anti-bacterial and virus infection prevention vaccines and similar products form a large portion of the rapidly growing biotech industry. Such firms are classified under SIC code 2836 and NAICS 325414. Currently, there are some 2,010 competitors in this technology intensive industry sector. Together these biotech firms generate over $188B in… Continue Reading