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. The Importance of Appraiser Independence… 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
Employee stock ownership plans or ESOPs for short, are a popular way to transfer business ownership while enjoying significant tax advantages. Current owners cash out in a planned, orderly way, while the company’s employees become the new business owners. Comparing options: ESOP or business sale On the other hand, business owners can sell the company… Continue Reading
Most people are familiar with the public stock market. The players are buyers and sellers who are individuals, mutual funds, and financial institutions. Most trades of public company stock are so-called minority ownership transfers. In other words, they involve a small portion of a company’s stock pool. The public stock market is highly liquid, investments… Continue Reading
Wishful thinking. Remember father telling you – nothing that is worth doing is easy. He was wise. He knew the truth because he went through the school of hard knocks. Life is not a walk in the park. The only thing that is easy is to lie down and do nothing. Measuring business value is… Continue Reading
If you are preparing a high quality business valuation, standard compliance is very useful indeed. Business appraisals follow a number of professional standards. One of the most detailed is the AICPA Statement on Standards for Valuation Services or SSVS No 1 for short. Understanding Valuation Standards: SSVS No 1 vs USPAP SSVS is a relatively… Continue Reading
Valuation of goodwill often comes about in the context of business selling price allocation. In the past, business goodwill was one of the intangible assets recorded on the books when the company changed hands. This acquired asset was then amortized over time. The new rules of handling goodwill have been published in 2001 by the… Continue Reading
Most professional business appraisers these days do their valuation in compliance with the Uniform Standards of Professional Appraisal Practice, or USPAP for short. And the USPAP standards have evolved to keep pace with the changing demands of the appraisal profession. Ethics rule for reliable, defensible and transparent appraisals Clients need reliable, defensible, and transparent business… Continue Reading
If you ask a business appraiser why clients show up, you will hear that there is some type of business transaction that drives the need for business valuation. Rarely do business people spend money on a business valuation just out of curiosity. The situation is similar to getting your personal or real property appraised. Why… Continue Reading
Do you want your business appraisal to make the professional grade? Then you should consider compliance with a major appraisal standard, such as the USPAP. The Uniform Standards of Professional Appraisal Practice govern valuations of all kinds of property – including real estate, business personal property, and business enterprises. Creating trustworthy business valuations The USPAP… Continue Reading
It is axiomatic that no business operates in a vacuum. General industry conditions are perhaps the biggest part of systematic risk a company faces. The reason it is called systematic is that you cannot avoid it by diversifying your business investment. The entire economy is affected, so you have to ride out the rough spots… Continue Reading
If you take a look at the highly efficient capital markets such as the NYSE or NASDAQ exchanges, the prices per share of public company stock are actually the minority share prices. What this means is that the buyers and sellers typically trade a small number of shares. Each block of shares sold does not… Continue Reading
If you look at either the build-up or CAPM cost of capital models for discount rate calculation, the elements can be broken down into two major groups: systematic and unsystematic risk. You cannot diversify away from the systematic risk as it affects the entire market. Unsystematic risk, on the other hand, is something the investors… Continue Reading
When a business sells, the owners are supposed to allocate the purchase price across all tangible and intangible assets. The overage is then deemed to be due to goodwill. In the past, it mattered little if some of the important intangible assets were lumped together with business goodwill. The reason? There used to be little… Continue Reading