Business Valuation Articles

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What to Look For in a Business Valuation

Are you considering selling your company or buying a company? An expertly prepared business valuation report may prove to be a very valuable investment. MORE

How to Spot a Bad Business Valuation

Credentialing bodies such as the AICPA, the ASA, and the NACVA have done much in recent years to improve and standardize appropriate valuation practices, yet there are many report writers still using outdated or questionable methodology. MORE

Business Valuation in Divorce

You’re an attorney and your client is in a contested divorce. Included in the marital property is a very profitable consulting firm. Your client is the primary operator of the business, and wishes to own it exclusively after the divorce. The spouse has no interest in owning the business after the divorce. Is it in your client’s best interest to obtain the lowest valuation of that business you can get? MORE

How to Use Earnings Multiples

Earnings multiples and so called rules of thumb have been around as long or longer than the practice of business valuation itself. One of the key approaches to estimating the value of a business is the Income Approach, which is based on the present value of future expected earnings. That sounds very similar to a multiple of earnings, doesn't it? It may, but it isn't. MORE

The Importance of Adjusting for Capital Structure

One of the most common errors made in small company business valuation reports in the Income Approach is failing properly adjust for capital structure. In the following case, accounting for working capital and capital structure result in huge value adjustments. MORE

The Best Comparable Transaction Analysis

Many appraisers prefer the guideline company method because of the quantity and quality of data available about the selected company or companies. Some appraisers will review hundreds of companies searching for the one most comparable to the subject company. This, however, is also the problem. We are lured by the data to over rely on one or a few comparable companies. MORE

Are Valuation Experts Tax Affecting the Wrong Earnings?

NYU professor and noted valuation authority Aswath Damodaran posted a blog article (The dividend 'tax cliff' approaches: Implications for stocks) about the potential devaluation of dividend paying stocks if the preferred dividend tax rate were to climb back up to the ordinary rate. If equities would be devalued due to an increase in the dividend tax rate, then the rate of return required by investors for equities was lower during the period the preferential rate was in effect than before or after the preferential rate existed. MORE

Why is it Important to Factor Out Real Estate When Valuing a Business?

One of the key principles in business valuation is risk: the risk perceived by investors associated with a particular asset or asset type (and the cash flows it produces) will determine the rate of return required by investors to induce them to take on that risk. MORE

Your Business's Genetic Code

Sometimes identifying your subject company’s specific industry and industry code is simple; often it is not. Carelessness in this step can have a significant impact on your conclusion of value.MORE

What is the Reliability Score?

We apply statistical analysis techniques to the data used in your business valuation, and calculate the effect of potential variation on your business value. By recalculating your business valuation more than 10,000 times while applying the overlapping variation, the distribution of results is an indication the reliability of your value estimate.MORE

Is there a better method of forecasting sales?

We gathered hundreds of data sets from a variety of small companies. Most of them had sales between one million and twenty million per year. We used the first five years of sales data (years one through five) to project the next five (years six through ten), and compared the projections to the actual data.MORE