Business Valuations are formal appraisals for businesses. Let's face it, the typical Southern California business owner does not want to spend money to learn what their business is worth. Business valuations do much more than generate a number on a page. For certain transactions, a business valuation can be the factor that gets the deal done. The valuation helps the owner justify the asking price via an independent third party who has not interest in the outcome. Unlike the business broker or business owner, they do not have a financial interest is seeing the business sold.
When do you need a Formal Valuation?
I strongly recommend utilizing a valuation when:
The asking price is over one million.
There is a dispute over asking price between owners.
The business is being sold due to divorce, partner split or other unfortunate circumstance.
In addition, valuations are often needed in cases where there is litigation. Courts will usually only recognize certified business appraisers. Valuations are sometimes needed facilitate the approval of the buyer's financing. This may be a situation where the buyer may want to acquire the valuation.
Types of Business Valuations
We offer several types of valuations. We facilitate the valuation by working with the business owner to prepare the financial statements and gathering the data. The valuations are performed in conjunction with Gulf Coast Financial and in accordance with the
Uniform Standards of Professional Appraisal Practice or USPAP.
Normally 50% of the fee is due at the initial engagement with the remainder due at the time the valuation is delivered. Our relationship with Gulf Coast Financial make our fees are quite competitive.
The Snapshot Valuation is a restricted use valuation intended for small companies with sales less than $250,000. The report is approximately 11 pages and provides a brief synopsis of how the valuation conclusion was determined. The basis of this valuation is a market comparison with like companies within an industry.
The Value Analysis is a restricted use business valuation designed specifically for the “main street” business with sales of $1,000,000 or less. The report is intended for “asset sale, financial buyers,” is approximately 40 pages providing and provides a summary of how the valuation conclusion was determined. The basis of this valuation is discretionary cash flow, since most main street businesses are bought and sold on a multiple of cash flow. The value considers primarily historical and current financial performance; very little time is spent with the Balance Sheet. The report contains the following (partial list of exhibits):
Historical Income Statement, Adjusted Cash Flow Statement, Comparable Sales (Market Approach), Various Graphic Analyses, Summary Review of Each Valuation Approach, Valuation Conclusion and Justification
Take a look at a Sample Value Analysis Report
Please note that the file is large and may take a moment to open, depending on your connections speed.
Limited Formal Valuation
The Limited Formal Valuation is a restricted use business valuation intended for the standard small business with sales between $1,000,000 and $7,000,000. The report is intended for “asset sale, financial buyers,” is approximately 70 pages providing and provides a detailed review of all aspects that were considered in determining the final valuation conclusion. The bulk of the report is financial analysis and the valuation conclusion is supported on much more detail. In addition to reviewing the company’s historical and projected earnings, the report also contains a detailed review of the Balance Sheet. The report contains the following (partial list of exhibits):
Historical Income Statement, Adjusted Cash Flow Statement, Complete Financial Statement Analysis, Common Size Analysis, Ratio Analysis, Industry Analysis, Economic, Regional and Industry Analyses, Comparable Sales, Detailed Description of Each Valuation Approach Considered and Used, Valuation Conclusion and Justification, Discounted Future Cash Flow Analysis, What-If, Hypothetical Transaction, Proof of Valuation, Valuation Matrix.
Merger & Acquisition Valuation
The Merger & Acquisition Valuation is a comprehensive business valuation for transactional purposes and is developed in accordance with the Uniform Standards of Professional Appraisal Practice (USPAP). This is a stock valuation and is intended for the middle market business with annual revenues in excess of $5,000,000, businesses that are expected to sell for more than $1,000,000, strategic acquisitions of niche businesses, and generally any business with significant growth expected in the future. The basis of the valuation is focused on future earnings and the selection of guideline companies comes from both the private and public markets. This report is a completely customized report and the number of pages can range from 30 to 200 depending on the information that is used to support the conclusion.
If you think that your business may benefit from a valuation, I would be happy to work with you to determine which valuation is right for you. Sample valuations are available upon request.
Do you have questions about our Business Valuations? Contact me today to learn more.
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