When it comes to business valuation using the income-based methods, you need a reliable business earnings forecast. Now all forecasts are at best educated guesses. So which one should you choose to improve the accuracy of your business valuation? Two obvious alternatives are to either adopt the financial projections created by the business management or… Continue Reading
One of the most important things you can do in a business valuation is to determine the earnings basis. Most income and market-based business valuation methods take some form of cash flow as its earnings input. Since accounting measures of business earnings usually require adjustments, calculating the earnings basis right can make a major difference… Continue Reading
One of the most important choices you can make when valuing a company is the proper selection of earnings basis. The idea is to capture the true earning power of the company. In virtually all professionally done business appraisals the earnings basis is some measure of cash flow. Net cash flow – the choice of… Continue Reading
How do you reach a business value conclusion? Given all the various business valuation approaches and methods, you have quite a choice of tools to calculate business value. However, each valuation method you use produces a result that may differ from others. When it comes time to state the subject business value, how can you… Continue Reading
Why choosing the earnings basis in your valuation important? Consider this: Whatever methods you choose for your business valuation, proper selection of the inputs is critical to the accuracy of your results. This is especially important if you are working with the income-based valuation methods such as the Discounted Cash Flow. Why picking the right… Continue Reading
Why should you consider making a number of cash flow projections in your valuation? A related question: Do you plan to value a business using methods under the income approach? Then the discounted cash flow technique is likely to be high on the list. Using this venerable business valuation method requires that you forecast the… Continue Reading
Looking back at the first decade of the 21st century, you can see the investor psychology at work in setting the valuations of businesses and other income producing assets. Once the frenzy sets in, business valuations can rise to lofty levels rather quickly, at least in the short term. This is often driven by market… Continue Reading
Curiosity aside, business appraisals are almost always triggered by a pressing need. Business people generally are interested in what the business is worth for these reasons: Business sale transaction, including sale of the entire company or offering a block of stock for sale. The need to raise additional debt or equity capital. Gift or estate… Continue Reading
In most jurisdictions, private businesses must pay the so-called ad valorem taxes on business personal and real property. Most business people treat these taxes as a necessary evil. In other words, you have to pay them regardless of how well or poorly the company did in a year. You simply have to fill out the… Continue Reading
Valuation of specialized assets is among the hardest tasks a business appraiser may undertake. Just about all businesses have such assets on hand. Imagine a technology company with specialized lab space and equipment. Or a manufacturing firm with its own set of machinery and factory floor layout. In each case the managers have adapted the… Continue Reading
Do you need valuation for an auto dealership? Here are some industry statistics to consider. New and used car dealerships are a significant part of the automotive retail and services industry. Classified under the SIC code 5511 and NAICS 441110, there are some 43,600 such establishments in the US alone. The industry sector generates a… Continue Reading
If you are valuing a private company, one of the key elements of the appraisal is assessment of the business risk. You can quantify your risk assessment as the discount or capitalization rates. To calculate these rates use any number of the cost of capital models such as the build-up or CAPM. Regardless of the… Continue Reading
If you are thinking of valuing an environmental consulting company, here are some key industry statistics to ponder. The industry sector, classified under the SIC code 8748-9905 and NAICS code 541620, consists of over 10,220 firms; mostly in private ownership. The industry sector as a whole generates about $13.4B in annual revenues. The average environmental… Continue Reading
Are you preparing a business appraisal for yourself or a client? Then following established business valuation standards could lend considerable credibility to your work product. Over the years the business appraisal profession has come up with a number of standards seeking to define everything from the methodologies to the scope and format of business valuation… Continue Reading
Residential and commercial real estate appraisal firms comprise a large segment of the real estate services industry. Classified under the SIC code 6531 – 9901 and NAICS 531320, there are some 14,000 such companies operating in the industry in the US alone. Together these professional services firms generate just over $5.8B in annual revenues employing… Continue Reading