We will provide a Certified Business Intermediary to work with you to establish a fair market value for your business. The Intermediary will typically collect marketing, operational and financial information directly from the business owner. We will then prepare a cash flow statement based on the company’s financial statements and tax returns of the past three to five years.
This information package is then utilized by one of our certified valuators. The valuator utilizes a number of different methodologies, including discounted cash flow models, income approach, market approach, and other valuation procedures that would be relevant to your specific business. This systematic approach and analysis of your business provides a reliable estimate of your company’s worth to both you and to potential buyers.
Why not use tax forms instead of an independent business valuation?
While tax returns can provide important information about a company’s taxable revenues and deductible expenses, they do not provide a complete picture of a company’s value. For example, the market value of assets is not reflected because of depreciation. While this may be good for tax purposes, it does not reflect the years of hard work involved in accumulating business assets. Corporate tax returns are also unable to account for longer buying cycles for repeat business, or valuable marketing tools that may be in place. This “goodwill” factor may represent a major component of what the business is worth.
Can a business owner truly know the market valuation of a company?
Over the years, it has been our experience that sellers either undervalue or overvalue their businesses considerably. This is why we rely on experienced business valuators who consider a wide-range of factors and national comparisons to complete their estimates.
What are the greatest benefits of independent business valuations?
An independent business valuation ensures that the business is not undersold. Our detailed, 30+ page business valuation analyses will convince a buyer that we have a valid basis for a particular asking price. Therefore, the business is not overpriced or underpriced, and does away with the risk of buyers reading the prospectus and then aborting the acquisition due to overpricing (potentially compromising confidentiality in the process). Lastly, with business valuation documentation in place, the buyer's lender will typically approve a loan considerably faster.
How do business valuation expenses compare?
To establish audited financial statements by a reputable CA firm, typical costs are in excess of $15,000, with another $30,000+ due to obtain a qualified valuation.
Even though a business valuation still might appear costly, the potential benefits far outweigh the cost. Typically, the cost is a mere fraction of the sought after asking price. By erroneously undervaluing your business, you could lose thousands of dollars. Without a solid analysis, you will need substantially more time to sell your business. Many buyers and investors will simply not look at your business as being seriously for sale, while others may engage you in long price discussions, and lenders will take more time approving a loan.