Business valuation tips, updates and advice. Pick up a few suggestions on how to value a business. Feel free to browse the contents or share your thoughts by leaving a comment.
The discounted cash flow or DCF valuation method is perhaps the most widely used technique in income based business appraisals. If you take a look at the calculation, you will notice that it consists of two parts: A discounted forecast of future earnings over a finite time period A so-called terminal value calculation The idea… Continue Reading
Car rental companies are ubiquitous at airports, inner cities, suburbs near auto dealerships. Temporary transportation has become so important that the industry has grown by leaps and bounds. In fact there are over 6,300 such companies in the US and their number is growing at about 28% every five years. The industry generates combined revenues… Continue Reading
You can see from our discussion of business valuation that there are a number of ways to determine what a company is worth. In theory the results you get by using the different methods should give you very similar answers. That often is indeed the case, yet the actual business values calculated with various methods… Continue Reading
If you are considering valuation of a retail shoe store, here are some interesting industry stats to bear in mind: In the US alone there are over 28,000 shoe store businesses classified under SIC code 5661 and NAICS 44821. Together they generate a combined revenue of $26.9B annually. The industry employs 3,233,000 staff. The average… Continue Reading
When you value a business the result is valid for the present time. As business conditions changes so does the value of a company. One way to use this idea is to track how business value changes over time. If you run a number of business valuations over a number of years, you can see… Continue Reading
Are you planning on a valuation for a physical therapy practice? Physical therapy services are a large part of the health care industry. Currently, there are some 34,300 physical therapy clinics in the US classified under SIC 8049 and NAICS 62134 industry classification codes. As a health care industry sector, these businesses generate over $24.5B… Continue Reading
Valuing an advertising agency? Here are some key industry statistics to consider: There are over 14,300 such businesses in the US alone, classified under SIC code 7311 and NAICS 54181. The companies generate a combined annual revenue of $30.6B and employ just under 160,000 people. The average advertising agency has $2,136,000 in annual sales with… Continue Reading
It is well known that all business valuations are done as of a certain date. It is possible to prepare a business appraisal at some point in the past. One benefit of this is that you have some ideas as to how things actually turned out. In fact, professional business appraisals are sometimes done as… Continue Reading
The concept of control premium in business valuation is this: to obtain control of a business the investor usually has to pay the per-share price that is higher than what a single share of the company stock sells for. Why would an investor seek a controlling share of a company? Because with control come a… Continue Reading
Valuation multiples are commonplace in business valuations. Their appeal is that it is easy to estimate your business value by comparison to sales of similar companies. Yet no two business enterprises are the same. How can you make sure that the valuation multiples you use give you the right answers about your company’s worth? Focus… Continue Reading
If you check the leading standards on business appraisal, all properly done business valuations require some sort of a report. In fact, the venerable Uniform Standards of Professional Appraisal Practice (USPAP) dedicate a complete Standard 10 to specifying the scope and format of a business valuation report. The idea is to communicate to others what… Continue Reading
For valuation of companies that pay income taxes at the entity level the business appraisal needs to take this into account. In a vast majority of professional business valuations you are likely to see, the local (e.g. state) and national (e.g. federal) income taxes are combined into a composite income tax rate. In the US,… Continue Reading
Asset approach, also known as the cost approach, is one of the three major ways to value a business. Formally, this approach relies upon the economic principle of substitution: The business value equals the cost of recreating an enterprise of equal economic utility. The idea is that two businesses that generate the same economic benefits… Continue Reading
The key assumption behind the market comparable valuation methods is that the value of a business is revealed once you see what similar companies sell for. If a piece of business equipment has been sold in, say, the last six months for $350,000 then it is likely that we can get about the same if… Continue Reading
Valuation multiples that relate business value to some measure of its earnings are among the most typical tools used in business appraisals. There are essentially two types of such valuation multiples: economic multiples that relate business value to its cash flow accounting multiples that use any of the well known business profitability metrics. Business appraisers… Continue Reading