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As mentioned in a previous article, valuing intangible assets can be an important part of any business valuation for marital dissolutions, gift tax determination, estate planning, shareholder rights cases, conversion from C corporation to S corporation or sale of a business. An experienced business appraiser will help you identify the intangibles unique to your business,… Continue >>>
This is a good time to reflect on three important and misunderstood aspects of the role of the valuation professional: The valuation professional. The nature of the finding. How are the findings used. Role of the Professional: Valuation professionals may act as either an “appraiser” or “consultant” – but not both in a single engagement.… Continue >>>
Assessing risk is a crucial part of valuing a closely-held business. Business appraisers use risk assessments in the income approach to estimate rates of return (discount rates) and in the market approach to select valuation multiples. All else being equal, the higher a company’s risk, the lower its value, conversely lower risk (value drivers) increases… Continue >>>
In finance, we use words like price and value, as if they were interchangeable. I have been guilty of this myself at times. It is worth noting, price and value not only come from different processes, but are determined by different variables and yield different numbers at the same point in time. The essence of… Continue >>>
Adjustments for reasonable or replacement compensation – whether in corporate practice or when conducting a business valuation can be one of the most difficult adjustments to quantify. There are numerous factors that should be considered when adjusting compensation levels. Oftentimes, American Business Appraisers find an individual’s, whether they are the owner or principle within the… Continue >>>
The three key factors are profitability, growth and risk. Profitability, or more specifically, anticipated benefits will be the most important consideration by investors (i. e., buyers). Anticipated benefits will consider such items as the nature, capital structure, and historical performance. Growth considerations are generally the expected growth in earnings, along with the anticipated outlook for… Continue >>>
What is the process to complete a business valuation? Valuing a privately held business is not an exact science. To do it accurately requires experience and the ability to examine all the risk factors and value drivers involved. A business valuation typically takes three to five weeks to complete, depending on the size and scope… Continue >>>
The question that arises most often for many small business owners and others interested in purchasing a business is “what is a reasonable price for this business?” To some degree, every business is unique and therefore, there is no one-size-fits-all formula to determine the value. Years ago, I was visiting with a dentist who was… Continue >>>
The Tax Cut and Jobs Act (TCJA) contains a provision for reasonable compensation as defined in IRS Code Section 162. Reasonable compensation has always been an important issue in business valuation, but the TCJA has put a much brighter spotlight on the matter, which will be closer scrutinized starting in 2018. There is a new… Continue >>>
Those in the market for a business valuation may be asking themselves “what exactly is an intangible asset?” Webster defines it as “something that represents value but has either intrinsic value or no material being.” Such assets, while difficult to identify and determine the value of, often play an important role when a certified appraiser… Continue >>>
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