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
Valuing a business? Then the need to figure out the discount and cap rates for minority and controlling investments may be in the cards. Appraisers call this step in the valuation process assessing the cost of capital. Reliable evidence you can use to figure out your cost of capital comes from the public capital markets.… Continue Reading
Non-compete agreements happen quite often as part of a business sale. As a result, you should have a decent idea of the agreement’s value in order to allocate part of the business purchase price to it. Usually you would have a written contract obligating the business seller to refrain from setting up a competitive business… Continue Reading
Business appraisers try really hard to be objective in order to produce a realistic and well supported business valuation result. So can a business appraisal be objective and yet differ from another valuation of the same company by a different appraiser? The answer is yes. Why? Because business valuation is always about the future. So… Continue Reading
Now this one may surprise some people. You might expect being unable to find an asset that shows up on the books. But businesses may have assets in use that have been written off with a value of zero. So a seasoned business appraiser who went through a physical inventory count will never overlook the… Continue Reading
Value to whom? Now this one puzzles many a business person. Isn’t value of a business asset a single number? In other words, each asset has ‘the’ value. Not quite. Consider an example: A manufacturer of business equipment incurs costs of labor and materials to create a product. Let’s say the manufacturer calculates this as… Continue Reading
If you do business valuations internationally, it is a good idea to find out what the International Valuation Standards (IVS) have to say about the choice of methods. The standards are accepted for business valuation across the globe these days. In some countries the IVS is the de-factor national standard for asset valuations. One key… Continue Reading
You probably heard it often from companies: “Our people are our most valuable asset”. This may sound boring but the value of trained and assembled workforce is quite real. In fact, it is the employees that define the company and make it special. So what makes up the value of a workforce? In fact, it… Continue Reading
Capitalized earnings valuation method pops up all the time in appraisals of just about any income producing asset – commercial real estate, businesses, or any other valuable asset. What makes the capitalized earnings method so popular? So what makes this valuation method so popular? In short, simplicity and wide acceptance by the valuation professionals, courts,… Continue Reading
What does unlevering the beta for a company buy you? If you open any textbook on corporate finance, you will quickly run across the capital asset pricing model or CAPM. Experts use the CAPM in order to figure out business risk. More formally, the model lets you estimate the important discount rate. And that you… Continue Reading
What is the role of net cash flow in business valuation? Just talk to a seasoned investor who puts money into public company stock. And you will surely hear about various valuation multiples they use to figure out the value. Ratios of price to earnings, EBITDA, gross revenue or net sales are common knowledge. What… Continue Reading