What is a business valuation?
What is the difference between a valuation and an appraisal?
Is more than one standard of value used in business valuation?
Typically, business valuations use fair market value for the selling/buying transaction. It’s the price that both parties have agreed to willingly.
What types of business entities can be appraised?
My partner wants to buy me out, how do you value my ownership interest?
Are there different valuation approaches?
The asset-based approach calculates accumulated value over time by using your company’s underlying assets and liabilities.
The market-based approach uses the principle of substitution by reviewing other investments with similar traits as the investment you are considering. Then, the values are tested in the marketplace.
The income-based approach computes a company’s earning capacity. This is achieved by creating a forecast of your company’s anticipated bottom-line profit 5 years in the future. Then, we work backwards from your forecasted future profit, via a process called discounting, to arrive at the present-day worth of your business.
Can a Certified Public Accountant (CPA) appraise my business?
Will different valuation experts produce the same results?
There’s plenty of people who might offer to value your company such as accountants (see above), business brokers, business advisers and even real estate agents. However, despite industry knowledge and experience, they do not receive the same training or experience as a business valuator. This means the chances of receiving an accurate valuation are low.
Using an inaccurate valuation carries certain risks. Being overvalued results in paying more taxes or being disregarded by potential buyers and investors. Getting undervalued makes you easy prey for the shrewd investor looking to capitalize on your ignorance. Statistically, people’s expectations of value are off by an average of 27%. A valuation is small price to pay to get it right.
Do business valuation credentials matter?
What are business value transformation services?
“IT Valuations was instrumental in initially preparing us for the sale of our business and guiding us through the entire process. We would not have been able to have done this without them.”
Susan Crabtree President, Mission Critical Systems