ValuAdder Business Valuation Blog

Archive for the 'Business Valuation Tips' Category

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

All manner of confusing euphemisms pop up in various contexts. So you shouldn’t be surprised when you hear about pre-revenue companies. Young companies in the early stages of their development sometimes want to get an appraisal. For example, business owners may need to reach out for external funding or address issues such as deferred compensation… Continue Reading

Ever wonder how valuations of small and large businesses differ from each other? To be sure, some things should be obvious. For example, a big bell weather corporation looks a lot different than a mom and pop shop around the corner. Now compare a single owner-operator professional practice to a multinational firm. A tiny private… Continue Reading

With all the dollar printing going on, many business people wonder: what if the US government fails to repay its mounting debt? What effect would this have on the global financial markets?  And, more importantly, how will this affect what my business is worth? Risk free rate of return and discount rate The devil, as… Continue Reading

What are buyouts and dissolutions? And why would you need a business appraisal in these situations? Now most business owners prefer smooth sailing to abrupt shifts in direction of their companies. Once in a while, though, you may face the need to address challenges that call for a change in ownership structure. When this happens,… Continue Reading

To many business people business valuation looks like a big bang event.  In other words, it rarely happens and then it’s over. Indeed, appraisers usually do valuations in support of some strategic need, such as selling or buying a business. Also, courts often require appraisals in cases of legal disputes.  Moreover, tax authorities use valuation… Continue Reading

Why do you need to keep your business valuation software updated? Because there is no such thing as vintage software. Why not? Here are just a few reasons your business valuation software keeps changing all the time. Market data changes As market conditions change, so do the parameters you should use in your business valuation.… Continue Reading