Valuations

HOW MUCH IS YOUR BUSINESS REALLY WORTH?

A realistic valuation is a critical element regardless of the purpose.

In today’s advantageous market, many business owners still leave substantial money on the table when they sell their companies - most often because owner(s) do not truly have a handle on their company’s value. Also for the purpose in regards to divorce, estate planning, business planning, partnership disputes, etc. For these reasons, the valuation process is a true asset to the business owner. Valuing a company requires a broad scope of technical and business experience, the ability to consider and select appropriate valuation techniques, along with a thorough understanding of today’s tax laws and corporate finance.

Why Should Business Owners Consider a Qualified Business Valuation?

• SBA Lenders, Banks and sophisticated buyers require a qualified business valuation. A through, professionally prepared business valuation will assist the owner in:
   
  • Expediting the business selling time frame and solidifying the price of the business. 
     
  • Help identify the key value drivers, major strengths and, more importantly, the major weaknesses of a company allowing the owner to solve both obvious and hidden problems prior to the selling process. 
     
  • Determining a reasonable selling price. Many owners rely on general rules of thumb, casual advice from friends, or similar unreliable sources. Unless the business owner goes through the valuation process, he/she will not know. If the owner’s expectation of value is too high, it will prolong the selling process until a price concession is made. If the price is too low, money is left on the table.  
     
  • Fully understanding the value of the business will strengthen the owner’s negotiating position. In this market, one can expect buyers to be sophisticated and experienced. A business owner must be prepared. Sophisticated and experienced buyers will conduct a rigorous analysis of the Company even if the Seller has not. 
     
  • Estate planning and business planning purposes. Divorce. Partnership disputes, etc.

Valuation Process

1. Obtain and review key elements of the business which includes but not limited to: Corporate/Business Documents, Business Financial Records, Company’s Market, Key Personal, Key Customers, Industry Trends, and Comparable Sales of Similar Companies.
    
2. Determine value indications of the business and owned operating and non-operating assets using categories of valuation approaches: Assets, Market and Income approach.
    
3. Determine final opinion of value after consideration of all information obtained, reviewed, analyzed and making appropriate allocations for goodwill and other intangibles the business possess.
    
4. Prepare a written report.

Valuation Based On Size of Company

• Express Valuation - Annual Sales of $500K & Under
  Depending on the purpose, the valuation can range between 7 to 25 pages. The final document will contain a formal cover letter outlining the purpose of the opinion and valuation conclusion, followed by the supporting financial exhibits. 
   
• General Valuation - Annual Sales of $500K to $1MM                       
  A 40 - 45 page financial based valuation summary using general valuation techniques, comparable sold transactions, and industry rules of thumb. This type of valuation is designed specifically for small main street businesses. 
   
• Formal Business Valuation - Annual Sales of $1MM to $5MM  
  This limited scope valuation provides a complete analysis of the income statement and balance sheet, common size analysis, comparable transactions, industry analysis, economic outlook, current and future performance of the company.
   
• Mergers &Acquisition Valuation - Annual Sales in excess of $5MM    
  A USPAP Comprehensive Valuation for transactional purposes. This valuation is intended for the larger small business that are expected to sell for more than $1MM., strategic Mergers & Acquisitions and generally any business with significant growth expected in the future. This report is a complete and self-contained financial and operational review.