If we could see the future, and know exactly what your business’s future sales, profitability, and selling price would be, we could calculate its true value to you today with terrific precision. Unfortunately we cannot.
Can historical data be used to develop the optimal model of operating income?
In our relentless mission to offer the best business valuation possible, we paused to ask ourselves a critical question: “Can we identify a method of forecasting sales that is statistically more accurate than other methods?”
It is essential that your valuation expert has significant experience in business purchase and sale transactions. No amount of study can replace real world experience. We have been valuing companies and consulting with buyers and sellers through the negotiation process for more than fifteen years.
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recent years to improve and standardize appropriate valuation practices, yet there are many report writers still using outdated or questionable methodology.
Suppose for a moment you’re an attorney serving a client 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?
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.
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.
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.
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
First, let’s limit this discussion to companies whose ownership or use of real estate is incidental to their business activity, not companies for whom real estate ownership is central to their business activity, such as a developer or real estate holding company.
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.
When we developed mycompanyvalue.com, we wanted all of the valuation methodologies applied to be proven the best by data testing.