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.
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
Whenever you value a business based on income, you need to address two questions: What are the business earnings likely to be in the future? What level of risk is associated with getting these earnings on time and in full measure? Financial forecasts are a typical way to estimate future business income. The goal is to… 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
Business owners and buyers often conduct business valuation as part of a successful business sale or purchase. Yet there may be a difference between the economic value of a business and its actual selling price. One key reason is that business valuation does not account for the terms of a business sale directly. You can choose a… Continue Reading
Business valuation methods under the income approach feature prominently in professional business appraisals. These business valuation techniques work because you can determine your business value accurately based on two important factors: business earnings and risk. There are three key assumptions that help make your income-based business valuations highly relevant and accurate: Business people have alternative investment… Continue Reading
In the US alone, business owners and managers spend over $1 billion a year to determine the value of businesses and professional practices. So what are the reasons that prompt business people to conduct business valuation? Here are the most common ones: Buying or selling a business. Gift and estate (ad valorem) taxes. Securing debt or equity financing.… Continue Reading
A major component of the ValuAdder business valuation software is the financial worksheets. What is the purpose of these? In short, to help you streamline your valuation projects. And to do so, we have focused on the key step in your business valuation: financial statement reconstruction. Key step – financial statement reconstruction or normalization In… Continue Reading
If you are in an industry where businesses sell often, chances are there is plenty of data to estimate your business value by comparison with similar businesses. A common way to do so is to use the so-called pricing multiples. These pricing multiples are ratios which relate some measure of business financial performance to its… Continue Reading
If you are valuing a company that is going through a period of rapid growth, the Discounted Cash Flow business valuation method should be high on your list of choices. Using this key income-based business valuation method, you can get very accurate results. This is because the discounted cash flow business valuation lets you capture the company’s… Continue Reading
If you expect that your business valuation results will be reviewed by tax authorities, you may need to prepare a business appraisal report that meets several key requirements. In the US, for example, the Internal Revenue Service has published the Revenue Ruling 59-60 in 1960. This central publication outlines a number of requirements that a business… Continue Reading
Ask any seasoned business appraiser and you will hear: there are three ways or approaches to measure the value of any business, large or small. True, but there are some big differences between a small privately owned business and a multi-national giant. To get an accurate small business valuation you need to keep a few key… Continue Reading
Retail industry is very large and its well-being is essential to the health of the overall economy. As an example, the retail market segment represented by the US department stores, SIC 5311 and NAICS 452111, has over 3,500 establishments generating just under 76.9 billion dollars in annual revenues and employing more than 534,000 people. Retail businesses… Continue Reading
You can measure the value of a manufacturing firm using a number of well-known methods. Importantly, all of these fall under the market, income and asset approaches to business valuation. However, to get accurate business valuation results you need to focus on two key points. 1. Identify and include all income-producing assets in your manufacturing company… Continue Reading
Food service is big business. In the US alone, over 570,000 eating and drinking establishments generate nearly $375 billion in annual revenues and employ some 6.8 million people. The industry landscape is increasingly dominated by regional or national chains which account for more than 70% of the market. Yet the average restaurant grosses $1,200,000 and… Continue Reading
If you are looking at a business valuation result that just doesn’t make sense, chances are there is a mistake. An error can creep into your business valuation in a number of ways. Here are the top ones to watch out for – and avoid when valuing your business: 1. Choosing the wrong type of business value. Business… Continue Reading