Why Business Valuation?
The business valuation (sometimes referred to as a business appraisal) can be used for many reasons. The top 5 reasons to obtain a business valuation are:
- Partner Dispute / Divorce / Litigation.
- Obtaining Financing.
- Preparation For Sale of Business.
- Gift Tax / Estate Tax Planning Periodic.
- Assessment of Marketplace.
How Do We Establish Value?
A business is ultimately worth what the market will bear. It is worth the highest price a Buyer is willing to pay! Although we look at many valuation methodologies, there are four that are most widely accepted:
- Multiple of earnings / cash flow.
- Comparable transactions analysis.
- Asset-based valuation.
- Discounted cash flow analysis.
Valuation experts, mindful of the strengths and weaknesses inherent in each approach, will value a company with more than one of the methodologies, simultaneously comparing results to determine a correct valuation. Included in the process is an analysis of growth potential, risks, industry factors and other variables that may impact the value of an enterprise.
How Do We Get Started?
All businesses are different. Some businesses keep great books and records – others may not. We can work within any situation, however, to get started, most often we require:
- Signed engagement letter.
- A check for 50% of the agreed upon fee.
- Three years of business tax returns or profit-and-loss statements.
- Current year-to-date profit-and-loss statement.
- Current balance sheet.
- Approximate value of furniture, fixtures, equipment, and inventory.
How Long Does It Take?
Limited Scope Valuations, which are often used for obtaining lender financing, preparation for sale of the business, or conducting periodic analysis of the marketplace, can typically be completed within 5-10 business days. Full Appraisals, which are typically required for any form of tax planning or litigation will require 3-4 weeks to complete.
What Is The Cost?
The cost of the valuation varies with many factors including purpose (whether for internal or external purposes, acquisition or litigation), business size, type of corporate identity, years in business, whether the business has clean books, etc.
You will find VR M&A’s prices to be much less than most sources!
Every day, more and more business owners demand our proven skills and resources to help them succeed in an increasingly complex middle market.