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.
If you are preparing a high quality business valuation, standard compliance is very useful indeed. Business appraisals are governed by a number of professional standards with one of the most detailed being the AICPA Statement on Standards for Valuation Services or SSVS No 1 for short. SSVS is a relatively new standard, at least when… 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. Systematic risk is unavoidable, you cannot diversify away from it as it affects the entire market. Unsystematic risk, on the other hand, is something… Continue Reading
The debate about how to assess company risk and calculate the discount and cap rates rages on. While the CAPM and Build Up cost of capital models remain widely accepted, the devil, as usual, is in the details. None as obvious as when using the risk premia for building up the equity discount rates for… 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
Take a look at a professional business appraisal report and you will see a discussion of the current trends in the industry and expectations going forward. No business operates in a vacuum and economic conditions, especially emerging trends in the industry sector, make a big difference to what a company is worth. Think about a… Continue Reading
If you are looking to appraise a business, looking at market evidence to support your conclusions is very useful. After all, the market is the final arbiter of what a company is worth. Short of test driving the market by putting your company up for sale, looking up recent business selling prices is the next… Continue Reading
The USPAP standards, published by the Appraisal Foundation, cover every element of valuation for real, personal, and business properties. When it comes to reporting your business valuation results, it’s worth consulting Standard 10. The Standard does not dictate the choice of form, format or style in compiling valuation reports. This is left to you as… Continue Reading
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