Careful business owners establish how a business will be valued for the purposes of
sale or increase/decrease in ownership, rights of first refusal and other common equity
actions. By knowing the ongoing true value of the business on an periodic basis,
owner speculation is kept to a minimum and owners always know where they stand.
Mergers & Acquisitions
Much of our business is oriented to mergers and acquisitions. We find many of our
clients need high quality statements of business value as they proceed in acquisition of
similar businesses or the divestiture of operating assets that no longer fit the company
Our clients often use business valuations as one of the cornerstones of a long-term
financial plan to enhance the value of their business. Business valuation consulting
focuses on how business development activities, strategies and tactics create value for
business owners. We often advise clients on how development of the business today
will produce a more salable product three to five years down the road or when they plan
to exit the business.
Valuations are often an important part of obtaining debt or equity financing.
Estate and Gift Planning
If an interest in a closely held company is material to a person's net worth a valuation
of that investment should be an integral part of the person's estate planning. When a
person dies a posthumous valuation of a closely held business is often done as part of
the estate's tax return. These valuations are important because the IRS audits most
estate tax returns even if the value of the closely held business is of modest value.
Other Taxation and Regulatory Reasons
A smaller portion of our business deals with other regulatory and taxation issues. We
service this business on an ongoing basis as required by the CPA and legal firms we
Q: What Are The Components of a Business Valuation?
A: IRS Revenue Ruling 59-60 states that valuations should address the
|The nature and history of the business|
|The general economic outlook and the conditions of the specific industry|
|The book value of the stock|
|The financial condition of the company|
|The earnings capacity of the company|
|The dividend paying capacity of the company|
|Whether the company has goodwill or other intangible value|
|Previous sales of stock|
|The market price of publicly traded companies who are engaged in the same or |
|similar lines of business|
Q: What Are The Steps Involved In The Valuation Process?
A: The National Association of Certified Valuation Analysts (NACVA)
establishes the following sequence for any competent Business
As Accredited Valuation Analysts and members of the NACVA organization, we follow
all NACVA valuation processes, procedures and rules.
Step One: Purpose, Standard of Value, Premise of Value, Valuation Date, Nature of
Subject Interest, Limiting Conditions, Qualifications & Experience, Legal or Regulatory
Step Two: Financial Analysis, Economic & Industry Analysis, Site Visit
Step Three: Benefit Stream
Step Four: Risk Analysis-Cap Discount Rate
Step Five: Valuation Approaches; Asset, Market or Income
Step Six: Asset; Adjusted Net Asset
Step Seven: Income - Capitalization of Earnings Method, Excess Earnings Method or
Discounted Earnings/Cash Flow Method
Step Eight: Market - Public Company Data Method Or Transaction Based Methods
Step Nine: Selection of Most Appropriate Approach/Model
Step Ten: Discounts or Premiums
Step Eleven: Sanity Checks
Step Twelve: Value
Click here for a presentation on Business Valuation In Practice.
Click here for a Business Valuation Fact Sheet.
Click here for a Business Valuation Case Study of ABC Construction Company
performed by MCOM.
Please contact us for a FREE analysis of your business valuation needs!