In business valuation, two methods stand out: Capitalized Earnings and Discounted Cash Flow (DCF). Each method brings its unique perspective to the table, offering business people and appraisers distinct lenses through which to view the value of a company. Capitalized Earnings: a snapshot of stability Capitalized Earnings is a valuation method that places a significant… Continue Reading
When it comes to business valuation, market comparables or comps is a commonly used method. In essence, you compare the target business to similar businesses that have been sold recently. While this method has its merits, relying solely on market comps can be unwise for several reasons. To obtain a more accurate and comprehensive valuation,… Continue Reading
Choosing the appropriate earnings basis for your business valuation is key. One choice made by professionals is the Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). However, like any tool, it has its pros and cons, which merit careful consideration. Some points: Pros Normalization of Earnings and Expenses Adjusted EBITDA allows for the normalization… Continue Reading
You can use business valuation for various transactions, including mergers and acquisitions, investment decisions, and even internal assessments of the company’s value. Among the methods employed in business valuation, revenue multiples have gained popularity for their simplicity and accessibility. However, while revenue multiples can offer you quick insights, relying solely on them can lead to… Continue Reading
For a company a key measure of success is its ability to create a steady and predictable income. In other words, the business must generate desired returns for its owners given an acceptable level of risk. No other business valuation method captures this idea better than the discounted cash flow valuation method. What is Linear… Continue Reading
Creating an earnings forecast can be challenging when the current year is not yet completed, and only partial data is available. In this blog post, we will explore two methods of creating an earnings forecast with a partially completed year: using only historical data, and using proration. Method 1: Using Only Historical Data One way… Continue Reading
In business, meetings of decision makers are often seen as valuable networking opportunities and sources of valuable insights. However, not all gatherings are created equal, and the Davos meeting of elites is a prime example. Perhaps larger corporations may find such events useful. But gatherings of this kind often prove to be irrelevant for small… Continue Reading
Companies in different industry sectors often bear little resemblance to each other. Consider a professional advisory firm and a sporting equipment retailer. So does business valuation by industry follow different rules? The short answer is no. Business valuation methods remain the same regardless of the industry your company operates in. You need to estimate the… Continue Reading
Business valuation is the process of estimating the economic worth of a company. Business people get valuations for a number of reasons, such as mergers and acquisitions, taxation, litigation, and strategic planning. While business valuation relies on a lot of math for analysis, is not an exact science. In fact, it is an area of… Continue Reading
Just about any valuation project is likely to involve the discounted cash flow method. The company value is estimated based on its expected future cash flows and risk. You can use the discounted cash flow analysis to value not just businesses but other income producing assets such as stocks, real estate, projects and much more.… Continue Reading
Businesses recognize the value of contracts if they offer advantages in terms of lower operating expenses, competitive position, or critical asset retention for some period of time. Consider the important types often seen in successful companies: Leases of business premises. Supplier and other vendor agreements. Employment contracts with key staff members. Licensing rights. Franchise agreements.… Continue Reading
When business appraisals come under the scrutiny of courts, lawyers on both sides reach out to appraisers to testify as expert witnesses. Who gets selected? Usually, attorneys tend to pick the professionals who offered such expert opinions in court before. But how does an appraiser get selected for the first time? Clearly, an attorney decides… Continue Reading
Why would you want to do business valuations in the past? Indeed, most business valuations are done as of the current date. The idea is to figure out what a company is worth right now. Yet once in a while, you may need to establish what the business was worth at some point in time… Continue Reading
Why do conflicts in business valuation arise? When business owners don’t see eye to eye they may be tempted to part company and go their separate ways. Naturally, they would want to be compensated for their share of the business. And this creates the need for a business to be appraised. If the dispute is… Continue Reading
Ask any appraiser about the ways to figure out the value of an asset or a business. You will hear that there are only three ways to do this. You may be surprised that all these smart people managed to come up with is just three approaches to valuation. Yet this is true, only three… Continue Reading