Part of business appraisal is assessing the value of business assets. This is especially important if the company is for sale and the purchase price needs to be allocated across its asset base. Business equipment values are typically established by market comparison. A business machine is valued based on its functional utility and condition, regardless… Continue Reading
Figuring out the actual values of business assets is a common task in business appraisals. Pick up the property records in a typical company, and you are looking at the book values. Sounds easy, right? Welcome to the real world. The fact is that business assets can and do disappear, while being on the books.… Continue Reading
Does the value of a company depend on which country it operates in? The answer is yes, and here is why. Business value is about risk and return. In other words, what makes a business valuable is how much money it makes given an acceptable level of risk. Investors, including business owners, look to put… Continue Reading
Whether you are buying or selling a private business, establishing its market value is critical to a successful transaction. Depending on which side of the transaction you are, you may need business valuation for these reasons: Determine a reasonable selling price Support your asking price Screen businesses for sale to select promising acquisition targets As… Continue Reading
If you are considering a dental practice appraisal, here are some interesting industry statistics: There are over 133,000 privately owned dental practices in the US alone, classified under the SIC 8021 and NAICS 6212. Dental practices are a large part of health services and generate around $104B in annual revenues growing annually at 11.6%. Yet an average dental practice is… Continue Reading
In the real world comparisons rule. We compare products, services, features and prices all the time. Price per square foot is the yard stick used by the real estate industry to compare properties. In a world of substitutes it seems there is always the next best thing out there. Apples and oranges comparisons But how… Continue Reading
Ask any professional business appraiser and you will get an earful about the financial statements, adjustments and the true economic income estimation. Why all the fuss? In a perfect world, you should be able to figure out business value by just using the company’s financial statements. After all, don’t the income statements and balance sheet… Continue Reading
What type of business earnings do you use in private business valuation? The difference could be huge, the results misleading. Public or private, business value is about returns at a level of risk you can accept. Risk is typically captured in the form of discount or capitalization rates. You can calculate these by using the… Continue Reading
If you ever valued a private company, you probably ran across the venerable Multiple of Discretionary Earnings business valuation method. This technique is perhaps the most common in valuing owner-operator managed businesses. Its appeal is simplicity and excellent coverage of value factors that demonstrate what creates business value and how you can improve operations in… Continue Reading
As you probably know, the Internal Revenue Service is the tax arm of the US Treasury Department. Unsurprisingly, valuation of businesses and other assets is of interest to the IRS. Through the years, the service has published a number of interpretations that have come to be widely supported in professional business appraisals. These revenue rules,… Continue Reading
If you are considering using the income based methods in your business valuation, you have two main choices: capitalization or discounting. In simple terms, the difference boils down to how you intend to treat the expected changes in business earnings going forward. In using the discounted cash flow method, you specify the anticipated earnings explicitly… Continue Reading
If you ask a business appraiser, you will hear: business value is in the eyes of the beholder. In formal jargon, business valuation results depend on the standard of value you use. One of these standards is known as the intrinsic value. As the name implies, this is the measure of value one figures out… Continue Reading
Take a look at a professional business appraisal report and you will see the valuation date prominently displayed. Clearly, business appraisers deem this date worthy of mention. Why is this the case? Business value changes over time Business value can change quite a bit depending on circumstances that change over time. If you pay attention… Continue Reading
Can you use financial ratio analysis in business valuation? If done correctly, this could be a helpful adjunct in your valuation. Specifically, reviewing financial ratios could help you spot the company’s strengths and weaknesses, and compare its performance to industry peers. Here are the major groups of ratios to consider in valuing a company: Short-term… Continue Reading
Business appraisers usually pick two approaches when valuing a start-up: the income approach and market comparables valuation. Income valuation challenge: earnings forecast If you focus on the income approach, be aware of its limitations. Since the young companies have limited track record of earnings, you face a challenge in forecasting the income stream with any… Continue Reading