Business valuation tips, updates and advice. Pick up a few suggestions on how to value a business. Feel free to browse the contents or share your thoughts by leaving a comment.
Whenever the issue of business valuation comes up, the subject of the best method selection is sure to follow. Perhaps the most common is the market approach. Market based valuations let you compare a target company to other similar firms whose value is known. Such is the case if a number of comparable companies have… Continue Reading
The income approach assumes that investors have a number of alternatives to put their money into, from risk-free government debt, such as US Treasurys, to venture backed start-ups. In an efficient market, sensible investors demand greater returns for assuming the extra risk. The value of a start-up is seen in the context of this question,… Continue Reading
One of the best known methods in private company valuation, the multiple of discretionary earnings technique, requires that you assess the firm across a number of value factors. You score the company on how well it does in terms of earnings growth. For intance, whether its industry sector has good prospects. Or how well it… Continue Reading
In business, cash is king. It stands to reason that the primary function of a business is to generate desired returns for its owners. Unsuprisingly, business value is defined by its earning capacity. The greater the returns, given an acceptable level of risk, the higher the business value. No other business valuation method captures this… Continue Reading
We are often asked: what business valuation methods are best for a specific industry? Since the standard valuation methods can be used to value any business, a better question is what choices work best to value a particular company, regardless of the industry it’s in. If you have seen a professionally prepared business appraisal report,… Continue Reading
The subject of business valuation comes up all the time whenever the sale of a company is planned. Both business owners and buyers feel they need to know what the business is worth before making any commitments. You might conclude that the business selling price should be defined entirely by the number that represents business… Continue Reading
A number of small business forms are available that allow owners to avoid the pass through the taxes and avoid double taxation associated with large public companies. Example is a US S corporation, a typical small corporate form adopted by many business owners. The individual shareholders get a pro-rate share of taxes they report on… Continue Reading
One of the most important standards you need to consider when writing a business appraisal report is USPAP Standard 10, published by the Appraisal Foundation. USPAP stands for the Uniform Standards of Professional Appraisal Practice. As the name implies, the standard seeks to provide a set of ground rules. And professional quality report widely apply… Continue Reading
You may have heard about the attorney client privilege and the legal rules. Professional advisers like accountants and lawyers must comply in order to safeguard client private information. Business valuation engagements fall in the same realm. For example, a large amount of private client information must pass back and forth between the appraiser and client.… Continue Reading
You may have run across a number of financial ratios in trying to analyze a company’s overall performance. The ratios are useful in a number of situations when the company’s financial condition, profitability, and efficiency in using its assets need to be understood. Using the ratios can help shed light on such important issues as… Continue Reading
Ask any professional business appraiser about the choice of valuation methods and you will hear that there are quite a few. By convention, the methods fall under three major categories, known as approaches. And you have three of those: market, asset, and income. No one approach to business valuation is bullet proof. If you choose… Continue Reading
If you take a look at ValuAdder online presentation, you will notice quite an array of valuation methods available. This is not surprising as most professional business appraisals are done using a number of methods. Why so? Because no one valuation technique is definitive. Each method looks at business value from a unique perspective. For… Continue Reading
Private companies have a choice of doing their accounting on the cash or accrual basis. You may wonder: is either choice more suitable when it comes to valuing the company? Matching income and expenses The question you face in a typical business appraisal is this. Are all business income and expenses identified and matched correctly?… Continue Reading
You may have noticed the current frenzy over cloud computing. Some pundits tout cloud services as if it was a promise of ultimate salvation: the reduced cost of software ownership, upgrades that snap in magically, and ability to access the service on any web browser enabled device. Sounds too good to be true? Unfortunately, many… Continue Reading
When you value a business, you usually focus on valuation of the entire enterprise. For example, you will generally see such valuations if the owners put the company up for sale. In addition, business valuation comes up when the owners consider a transfer of ownership, or for investment purposes, whether debt or equity. Valuing a… Continue Reading