Business Valuations

A Business Valuation is one of the most important decision making tools you can have at your disposal — How can you intelligently make any business decision if you do not understand the value of your business or the factors that drive its value?

Business valuation is a process and a set of procedures used to estimate the economic value of an owner’s interest in a business. Valuation is used by financial market participants to determine the price they are willing to pay or receive to consummate a sale of a business. In addition to estimating the selling price of a business, the same valuation tools are often used by business appraisers to resolve disputes related to estate and gift taxation, divorce litigation, allocate business purchase price among business assets, establish a formula for estimating the value of partners’ ownership interest for buy-sell agreements, and many other business and legal purposes.

Elements of business valuation

• Economic Condition
• Financial Analysis
• Normalization of Financial Statements
• Income, Asset and Market Approaches

A short summary analysis with limited documentation. Used when the client wants a quick and accurate, yet inexpensive assessment of the fair market value of their business. Utilizes 5-6 valuation methodologies. Primarily for businesses with less than $500 thousand in annual sales. (~15 pages) Requires 3-5 business days to complete.

Often used when the client needs to know the current fair market value of their business but does not require all the supporting documentation. Utilizes 6-8 valuation methods plus a nationwide comparison of businesses sold in same industry. Primarily for businesses with less than $3 million in annual sales. (~30 pages) Requires 1-2 weeks to complete.

Often used for internal purposes such as exit strategy planning or obtaining lender financing. Utilizes 8-10 valuation methods, industry analysis, demographic studies, plus a nationwide comparison of businesses sold in same industry. Primarily for businesses with less than $20 million in annual sales. (50-60 pages) Requires 2-3 weeks to complete.

Asset based or Stock based. With or without Minority Shareholder Discount. Required for pending litigation, IRS audits, partnership disputes, gift/estate planning, and for sellers, buyers, or lenders that are planning for the sale of a business that desire more thorough analysis and supporting documentation than the Full Scope Valuation will provide. Utilizes 10-12 valuation methodologies, industry analysis, demographic studies, plus a nationwide comparison of businesses sold in same industry. (90-100 pages) Requires 3-4 weeks to complete.