You can value any business or professional practice three ways, known to professionals as valuation approaches: Market – by comparing your business to similar businesses that sold recently. Income – by assessing your company’s earning power and risk. Asset – using the business assets as your valuation basis. There are a number of well-known business… Continue Reading
Whether you are valuing a business by yourself or engage a professional business appraiser, a business appraisal report is a typical work product you get. Such a report does more than summarize the business valuation results – it clearly defines what business ownership interests are being valued. Importantly, it also shows the key assumptions and judgement… Continue Reading
Valuing a company that is losing money? Businesses face a host of risks every day. But sometimes truly epic economic shifts occur. Whether a financial markets debacle or natural disaster, their effect on the economy and business fortunes may hit abruptly and have profound effects. Once high flying companies could face the headwinds that business… Continue Reading
If you are looking to sell your small business or plan to buy one, the central question is what the business is worth on the market. Overprice your business, and you will see little buyer interest. If your asking price is too low, you risk leaving a lot of money on the table. Knowing the market… Continue Reading
There are no better indicators of what a business is worth than its earning prospects and risk profile. Savvy investors analyze business opportunities by doing careful forecast of their income. But forecasts and money in the bank do differ in one key respect – there is a risk that the business may not live up… 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
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
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
Most business people expect that an established business is worth more than its asset base. This extra value is known as business goodwill. In other words, you can determine your business value as the sum of its assets plus business goodwill. The accepted way to estimate the value of business goodwill is to capitalize the… Continue Reading
One of the benefits of using asset based business valuation methods is that you can see how each business asset and liability contributes to business value. This is very useful for a number of important reasons: Estimation of business value for tax purposes. Business purchase price allocation. Determination of which business assets are available as… Continue Reading
Unsurprisingly, the income-based business valuation methods focus on business earnings as the key input to calculate business value. For example, the direct capitalization techniques, such as the well-known Multiple of Discretionary Earnings and Capitalized Earnings methods, use a single number as its earnings input. You also need to make a matching choice of capitalization rate.… Continue Reading
Payback period is the time it takes to recover your original investment. If you are buying a small business, that’s your down payment money. You can use ValuAdder Deal Check tool to factor in your payback period. Here’s how: 1. Your purchase price and terms Enter the purchase price and terms you have in mind. Next, specify the compensation… Continue Reading
One of the greatest strengths of ValuAdder is its flexibility. You will notice that ValuAdder offers you a number of well-known business valuation and deal structuring tools. With all the tools and business valuation methods available to you, you can make the choices that best fit your particular business valuation, business sale or purchase situation.… Continue Reading