Business Valuations

Finding the Right Number for the Sale

Have you ever sold or bought a home? How did you settle on the price? You probably started with a home appraisal and neighborhood analysis report. The transfer of a business is similar to a home, but much more complicated. Placing a fair market "value" on the business requires an assessment of company assets, location, economic, market, goodwill, and other factors.

True market value is obtained by using a fully qualified and experienced business valuation specialist to prepare a Market Valuation analysis. Without it, the seller may leave a significant amount of value on the table.

 It is called book vs. market values: many business owners use tax returns or financial statements prepared for tax returns as a basis of determining value. Tax returns reflect an understatement of "True Value" because they report depreciated assets and IRS deductions.

In addition, the business goodwill or name, which represents the market value of the company, is not a consideration for tax purposes and is often not reflected. What you have is a "book value" that is lower than the true "market value" of the business. A valuation reflects the "Fair Market Value" of a business. This represents the true economic value of your business.

 

 

Don’t Let a Buyer Pay Less than Fair Market Value!

 

 

Types of Valuations Offered

Broker Opinion of Value    (Click Here to Order)

 

The Broker Opnion of Value provides an analysis for pricing a small main street businesses. It enables the business owner to understand how to price his business comparative to like businesses in the marketplace.

SBA 7A Opinion of Value   (Click Here to Order)

The SBA 7A Opinion of Value provides an analysis for pricing a small main street businesses per the SBA 7A guidelines for financing. It enables the business owner to understand how his business will be able to be financed through the SBA 7A program by a potiential buyer. This opinion of value utilizes at least 3 of the comparative methods of value that are required by the SBA 7A loan program.

Methods Utilized:
Gross Revenue Multiplier
Cash Flow
Capitalized Adjusted Earnings

Value Analysis

 

The Value Analysis is a restricted use business valuation designed specifically for the “Main Street” company with sales of $1,000,000 or less. The report is intended for “asset sale, financial buyers” and is approximately 45 pages providing only a summary of how the valuation conclusion was determined. The basis of this valuation is discretionary cash flow, since most Main Street businesses are bought and sold on a multiple of cash flow. The value considers primarily historical and current financial performance and very little time is spent with the Balance Sheet. The report contains the following (partial list of exhibits):

 

Historical Income Statement

Adjusted Cash Flow Statement

Company Description and Highlights

General National/Regional/Industry Economic Data

Comparable Sales (Market Approach)

Various Graphic Analyses

Summary Review of Each Valuation Approach

Valuation Conclusion and Justification

 

Limited Formal Valuation

 

The Limited Formal Valuation is a restricted use business valuation intended for the standard small business with sales between $1,000,000 and $8,000,000. The report is intended for “asset sale, financial buyers” and is approximately 75 pages providing a detailed review of all aspects that were considered in determining the final valuation conclusion. The bulk of the report is financial analysis and the valuation conclusion is supported on much more detail. In addition to reviewing the company’s historical and projected earnings, the report also contains a detailed review of the Balance Sheet. The report contains the following (partial list of exhibits):

Historical Balance Sheet

Historical Income Statement

Adjusted Cash Flow Statement

Company Description and SWOT Analysis

Complete Financial Statement Analysis

Common Size Analysis

Ratio Analysis

Industry Analysis

More in Depth Economic/Regional/Industry Information

Comparable Sales

Detailed Description of Each Valuation Approach Considered and Used

Summary Review of Each Valuation Approach

Valuation Conclusion and Justification

 

Merger & Acquisition Valuation

 

The Merger & Acquisition Valuation is a comprehensive business valuation for strategic Mergers & Acquisitions and is developed in accordance with the Uniform Standards of Professional Appraisal Practice (USPAP). This is a stock valuation and is intended for the middle market business with annual revenues in excess of $5,000,000 and/or EBITDA of $1,000,000, strategic acquisitions of niche businesses, and generally any business with significant growth expected in the future. The basis of the valuation is focused on future earnings and the selection of guideline companies comes from both the private and public markets. This report is a completely customized report and the number of pages can range from 30 to 200 depending on the information that is used to support the conclusion.

 

IRS Revenue Ruling 59-60

 

A USPAP governed valuation developed for litigation focusing on US Court Reviews, Cited Court Precedents, and in-depth analysis and research of minority and marketability discounts. It is intended for Estate Tax, Gift Tax, ESOPs, Divorce, and any situation requiring litigation.  This valuation is normally used when the value of the stock is in question (minority or majority interest).

 

* Value Analysis and Limited Formal Valuation are considered “restricted use” appraisals.  All valuation reports not including the IRS RR 59-60 are meant for business transactions only.  If the seller or buyer requires a valuation for anything other than a business transaction, the IRS RR 59-60 report must be used.