A business valuation is the process of determining what a business or company is worth. It involves the concept of a transaction between a willing buyer and a willing seller. Valuation helps stakeholders understand the fair market value of the business based on its assets, liabilities, financial performance, market position, and future prospects.

Key methods used in business valuation include:

• Income Approach: This method determines the value of a business based on its expected future earnings or cash flows. Common techniques include discounted cash flow (DCF) analysis and capitalization of earnings.
• Market Approach: This method compares the business to similar companies that have been sold recently or whose stocks are publicly traded. It uses the concept of market multiples that have been realized on completed transactions and applies those multiples to certain metrics of the company being valued (i.e., EBITDA, Revenues, or some other commonly used metric). The concept is similar to a real estate appraisal in that we try to find similar companies and compare the sales price.
• Asset Approach: This method calculates the value of a business based on its assets and liabilities. It includes the book value of assets (adjusted for fair market value), liquidation value, or replacement cost.

Business valuation requires detailed financial analysis, industry knowledge, and often involves judgment calls based on qualitative factors affecting the business’s value. Professional valuators, accountants, or financial analysts typically perform these assessments using standardized methodologies and assumptions tailored to the specific circumstances of the business being valued.

There are many reasons for getting a business valuation. As a business owner, understanding the value of your business can be a critical piece of information in determining if your business is successful. In a more formal sense, valuations may be performed when a business is being sold, seeking investment, undergoing a merger or acquisition, or for other strategic planning purposes. Valuations are also commonly needed for tax reporting for gift and estate tax purposes, some forms of stock compensation, and marital dissolution (divorce) just to name a few.

We start the process by understanding the reason for obtaining the value and a few other key pieces of information. We then provide a detailed list of all the items needed to complete the analysis.

Once the initial data is obtained, the process looks like this:

1. Initial analysis of the financial data and historical trends – This allows us to develop an understanding of the business history and be ready with informed questions for the Owner / Management meeting.
2. Owner / Management meeting and site visit (if necessary) – Business owners love to tell their story and we love hearing it! This phase is where the client can tell their story about the business. How it started, where it is going, what are the challenges, why it is successful, etc. This phase is the time where we can gather non-financial information about the company. We are big believers in there being a story behind the numbers. This is where that story gets told.
3. Detailed analysis and application of valuation methods – Once the numbers and the other information is gathered, it is time to incorporate that information into the detailed valuation analysis and incorporate the various methodologies used to value the business. Simultaneous with this phase, we are working to prepare the schedules and reporting (the “deliverables”).
4. Review preliminary results with the client – We are big believers in making certain that our clients understand what the analysis means. At this point, we review the information and results and field questions, comments, or other considerations that may impact the final value.
5. Finalization – We deliver the valuation in final form to the engaging party or parties.

We understand cost is always a consideration. Different engagements require different levels of time and analysis. Generally speaking, our engagements can range from $2,000 up to $20,000 (yes…that is a broad range). It really all depends on the type of project and the specifics within that project. We believe strongly in “no surprises” when it comes to fees. That is why it is important to determine the full scope of the project. This allows us to determine exactly what you need in the form of analysis and a deliverable and provide a fee that all parties understand at the very beginning.

Our turnaround time fluctuates depending on our current workflow and existing projects. Generally speaking, the entire process can be completed within 30 days (sometimes quicker, sometimes longer). That timeframe assumes that we have most of the information to begin our analysis. When we discuss your project, we can be more specific on the timing.

Yes. We have valued unique businesses and assets. If for any reason we do not have the expertise to address your needs, we have professionals we can recommend.

We provide a detailed listing of information that is needed for us to complete a comprehensive analysis. The most critical information needed for us to get started on an analysis is 3 to 5 years of historical financial data and 3 to 5 years of tax returns. There is more that we will need but this gets us going.

Yes. We operate under the valuation standards set forth by the AICPA and other valuation governing bodies. These standards allow for different levels of reporting. We can prepare anything from streamlined reports or schedules that are designed to be used internally by management to reports that meet the requirements of the Internal Revenue Service for specific tax filings. Again, discussion of the project at the front end allows us to recommend the best level of service that provides the most cost-effective solution for your needs.

We like to think “NO”. There are indeed websites and programs where you can enter data and it will give you a number. However, the valuation process is both art and science. A canned computer program will not consider some of the nuances specific to a business enterprise that could significantly impact value. We believe the human element plays an important role in determining the value of the business.

There a couple ways to answer that question.  We assist with financial analysis, certain areas of buy-side and sell-side diligence and quality of earnings to get a business ready for market or to help someone looking at a target business for purchase.  However, we do not serve as a business broker or investment banker.  We do work closely with teams that do specialize in buying or selling a business and our services are a key component of that process.  If this is of interest to you, please reach out and let’s discuss the process.  We can provide a general overview of the M&A transaction process, outline how we can help, and connect you with other professionals that are necessary in the process.

As our motto suggests, we try to take what can be a complex calculation or process and make it understandable.  None of this is really “simple” but we attempt to make everything we do as user-friendly as possible.  This information we provide is only helpful if the client understands it.  Our goal is to break it down and make sure our clients get the most out of it.