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
Are you valuing businesses with operations outside the United States? Then you would do well to consider compliance with the International Valuation Standards or IVS for short. Published and promulgated by the IVS Council, this key valuation standard has been adopted by most market economies world-wide. Standards build public trust As the IVS Council states,… Continue Reading
Guess what keeps business appraisers busy and well paid. The fact that business people confuse the value, price or cost of businesses and business assets. But these are different things. Who says? The market. In fact, the market is where many participants express their opinions each and every day. So as your business appraiser would… Continue Reading
So why do you need to estimate the cost of capital for a business? If you own a business or serve business owners as a professional advisor, you participate in the market. Why is this important? Because the market defines how every participant plays their part. Guess what part of this game is crucial to… Continue Reading
If you take a look at public company valuations you will surely run across the multiples based on the EBITDA, EBIT and net income. But why don’t private company appraisal use these as often? The short answer: you have better choices of earnings basis to run your business valuation. Why? Because privately owned companies do… Continue Reading
Why should you concern yourself with adjusted present value? Now you probably heard about the present value. In other words, the company’s worth in present day dollars. You create a forecast of business earnings, build up your discount rate, and crunch the numbers. And the discounted cash flow valuation spits our your present value number.… Continue Reading
At some point in your business life you will likely run across a business valuation report. It may look like a brief opinion of value or a detailed work product which leaves no stone unturned. Some points to consider when reading a business valuation report. Read the report before jumping to the business value conclusion… Continue Reading