Like a medical checkup, a value of a business performed by a qualified business valuation services expert should be conducted on a regular basis because business value can fluctuate depending on market conditions, competition, and financial performance. Each business is unique and a business valuation will help diagnose whether that business is healthy or promoting unhealthy practices.
How Accurate & Defensible Are Business Valuation Reports By American Fortune?
Because American Fortune also provides Mergers & Acquisitions services, the firm possesses greater business valuation knowledge and experience. American Fortune Business Valuation Services follow the requirements as defined by the American Institute of Certified Public Accountants Statement on Standards for Business Valuation Services No. 1 (SSVS No. 1) and performed in accordance with the Uniform Standards of Professional Appraisal Practice (USPAP) as promoted by the Appraisal Foundation and the International Valuation Standards (IVS).
When procuring a business valuation report, make sure the valuation is built on a firm foundation that can withstand challenges. Finding the right company to value a business can make all the difference in obtaining an accurate and credible business valuation. American Fortune Business Valuation’s broad and unique expertise and experience results in the creation of very accurate, defensible and business valuation reports for the following purposes: wealth preservation, increasing wealth, sale of a business, business acquisitions, divorce, business loans, estate planning, buy out agreements or business exit & succession planning. Since the firm also performs Mergers & Acquisitions Services and Business Exit Planning they possess expertise and experience that most business valuation firms do not possess. Because American Fortune Business Valuation firm posses the additional expertise and experience it allows them to create very Accurate, Defensible and Low-Cost business valuation reports.
As businesses expand and our social environment becomes more service-oriented, it’s only natural for companies to expand their scope of services. Companies do it all the time…think Starbucks adding food or Amazon adding book publishing services. In the mergers and acquisitions world, the same trend exists. It used to be that if you wanted a business valuation, you called an accountant. Period. Now, there are attorneys, mergers and acquisition advisors, business valuation services companies and business brokers offering such services. So how do you know you’ve selected a quality firm to properly value a business? How can you feel confident your valuation is accurate and defensible? In my personal opinion, I’d recommend hiring a firm whose regular services include mergers and acquisitions as well as business valuation services. This skill combination provides the best foundation of knowledge on all the valuation elements.
To Increase the Value of a Business Perform the Following:
Standardize your procedures
Do everything possible to make the business appear as if it operates without any hurdles or stumbling blocks. Update and document operating policies and procedures; write a formal business plan; create written job descriptions; develop a systems manual; establish a fair market value for all furniture, fixtures and equipment of the business. In general, get things documented and in order!
Make yourself replaceable
The last thing in the world you want is to have potential buyers think that you and your business are one-and-the-same. Begin in advance to assemble a management team that is capable of running the business after your departure. You need to present the image that the business will continue its profitable operation with -or without- your involvement.
Price the business realistically
Pricing is always a sensitive issue with business owners – right so in that the business has, over the years, become an integral part of the business owner’s identity. All owners want to feel that the entity they’ve built is worth (valued) as much to everyone else it is to them.
First and foremost, maintain objectivity
Remember, business value has nothing to do with sentiment or emotion – it’s derived from multiples, cash flows, capitalization rates, comps, risks and excepted rates of return for the risk. The primary purpose of business valuation is to document clearly that the pricing of the business is objective and correct and to defend that pricing in negotiations for sale or other uses where an accurate business valuation is critical. There is no doubt that the value of a business will very often be negotiated. It’s very important to be prepared to defend a business valuation with a well prepared business valuation report. In the sale and acquisition of businesses price negotiations revolve around the method used to value the business. A buyer will, of course, say that the business valuation was not performed properly and insist that a lower price is justified. A strong and defensible business valuation will definitely support a given party’s winning argument.
The time you take to make your business more marketable will ultimately be beneficial to expedite the ownership transfer and increase the sales price. Additionally, any steps taken in advance of the sales process will make your business more valuable in comparison to other alternatives in the market. We expect to go to market with an accurate and fair value placed on the business. Still, the negotiations will occur and some level of accommodation will no doubt be required. The question of how firm we stand in negotiations is a matter of defending our position, and where do we make that stand price, owner financing, transition service, etc.?
Making Sense of Business Valuations
A Business Valuation is an important tool for a business owner and will help to validate the true worth of a company. Valuing a business requires a broad scope of technical and business experience, the ability to consider and select the appropriate valuation techniques, along with a thorough understanding of today’s tax laws, corporate finance and market conditions.
An unbiased business valuation prepared by a certified business valuation services expert serves as a benchmark minimizes ownership disputes and provides you with a realistic and defensible value for your company. Business Valuations are “decision-making” documents. Business owners quite often tend to arrive at a value for their business based on intrinsic factors: combining sweat equity and emotion together with the actual dollar value of their investment. All too often, they fall into two extremes in valuing their own business: either too high or too low. Market conditions can greatly affect business value as well as the unique circumstances applicable to the business itself.
It is not unheard of for unsolicited buyers to offer to purchase a well-run, financially sound business, often offering a below-market price. In this case, a business owner may be delighted at what they perceive to be a good offering price for their business. What they may not know about market conditions favoring their particular industry could end up costing thousands of dollars. It is especially important for a business owner to obtain a Business Valuation when an unsolicited offer walks in the door. More often than not, these unsolicited offers have recognized a fantastic opportunity: a great business with an uninformed owner, willing to sell at below market value because they have no idea of the true value of their company. With a detailed business valuation in hand, an owner has the ace necessary to maximize value in a business sale.
Buyers often do quite a bit of shopping around before making an Offer to Purchase. Quite often a buyer will tend to undervalue a business due to inward biases. For example, a buyer will often assume that because the economy is not at its peak, any business for sale can be obtained at rock-bottom pricing. An appropriate business valuation will strengthen a seller’s position during the negotiation process and serve as a benchmark for the sale price of the business.
Divorce proceedings are especially crucial times and a solid and the use of the best Business Valuation Services is critical. While emotions run high and legal fees multiply overnight, a detailed valuation that will hold up in court is crucial. The last thing a business owner needs is to pay higher legal fees due to contested business valuation.
Many other business events require Business Valuations: mergers, loan applications, other types of litigation, family succession, future growth planning, partnership disputes, tax purposes, etc. Each of these scenarios has different requirements and purposes for their valuations. Make sure your professional advisers are accurately informed about your business’ value.
The primary purpose of a business valuation is to document clearly that the pricing of the business is objective and correct and to defend that pricing in negotiations for sale or other uses where an accurate value is critical. There is no doubt that this transaction will be a negotiated process. The seller needs to be well prepared for defending the price. Price negotiations revolve around the method used to value the business. A buyer will, of course, say it was not correct and insist that a lower offered number is the appropriate one. The stronger the valuation in setting a price, the stronger the stance effectively negotiate for better price and terms.
Business Valuation Services For a Business Sale
Determining the valuation for a business sale of your business is both a science and an art. On one hand, there are hard facts: income, expenses, profit, etc. On the other hand, one must consider market factors: industry trends, saturation, economic conditions, etc. Which numbers are most important? How should these variables be weighed? What will a buyer focus on most?
A business valuation equips an owner with these answers…and many others. But the one question that trumps those listed above is: Why do I need to hire a business valuation expert to do it? With a business valuation costing several thousands of dollars, it’s easy to understand why an owner would want to simply come up with a price for their business themselves. We at “ALWAYS be hired to conduct a legitimate, defensible business valuation. Below are our top reasons why:
It’s complicated. A thorough business valuation computes six to ten different valuation methodologies and then weighs each result to determine a final valuation number. Specific valuation resources such as the RMA, Pratt’s Stats and BIZCOMPS are used to compare a company’s information with similar businesses. Financial documents need to be reviewed to analyze both the historical and projected performance of the company. If a business owner were to attempt to price their business for sale it would take many months to 1) learn how a business valuation methodologies work, 2) prepare a valuation for their own company.
In business for sale, the owner and the Business Intermediary must be prepared to defend the asking price. Savvy buyers will closely examine the business valuation and strategically ask questions that, when answered poorly, will support an argument for reducing the asking price. When preparing a business valuation, a credible business valuation services expert will anticipate buyer challenges on the valuation price and incorporate value defenses directly into the document. This gives owners a sense of confidence and support when negotiating with potential buyers.
A valuation for business sale independently validates and benchmarks the true worth of a business. Business owners over-value the worth of their business a majority of the time. “I was contacted recently,” begins Brian Mazar, Managing Director of American Fortune Mergers and Acquisitions, “by a woman who was one year into the sale of her business and buyers telling her that her business was overpriced. She needed a business valuation because she arbitrarily priced her own business at $1 million dollars. Once I incorporated all the details of her business financials and did the analysis, her business was only worth $755,000. The news was quite hard for her to hear.”
Owners put so much of themselves into their businesses that it’s only natural for them to think “their baby” is worth more than it actually is. Part of this is due to an owner’s emotional attachment and part is due to their perception of cash flow. “Just because you earn several hundred thousand dollars a year does not mean you can simply multiply that out and put a large price tag on your business. Unfortunately, though, owners do it all the time,” Mazar shares. The story has a good ending because the American Fortune Mergers & Acquisitions Advisors performed some consulting work for this woman and were able to improve the business which resulted in increasing the business valuation of the business to $1.1 million.
Cost & What’s Included
There is no reason why credible business valuation services have to be expensive. Business Valuation Services by American Fortune are not only accurate and defensible they are also low cost. American Fortune Business Valuation Services offers three different levels of valuation for business sale reports. These are based on what the end result of the valuation needs to satisfy. Why is the valuation needed? How strongly will it need to be defended? Does the recipient need or require much detail? How complex is the business? How knowledgeable and experienced are the buyer and their advisors?
Business Value Estimate This report is specifically designed for business owners to provide a fast and easy estimate of value for a business. The report is based on a combination of 8 valuation methodologies, a comparative data that help verify the estimate of value. This report is not a professional valuation of a business and is not suitable for use in estate planning, divorce proceedings, buy-sell agreements, ESOP’s, IRS issues, or legal proceedings. The report is 38-41 pages. Price: $1,250. To view a sample Summary Value Estimate – View Sample
Calculation Of Value Report A calculation of value is NOT a Valuation (Appraisal) because the appraiser is not coming to a “conclusion of value”, but merely a “calculation of value” complete valuation (appraisal) since it is based on a limited amount of investigation and due diligence. Although a Calculation of Value does not meet USPAP or IBA Standards, it can be a very valuable tool for business owners, professionals or other purposes. This value report takes basic value drivers to produce a semi-formal valuation. It utilizes four to five valuation methodologies. This type of value report yields a moderately defensible valuation report. Typical uses for this report are: Assisting an owner, broker or m&a advisor to establish an initial asking price for the sale of a businesses, Estate planning, Business planning, Developing a “preliminary” value for litigation matters, Any matter where an “initial” or “calculation” of value is acceptable, Businesses with an EBIDTA of less than $300K. The report is 30-33 pages. Price: $2,300. To view a sample Calculation of Value Report – View Sample
Comprehensive Business Valuation This type of report explains in full detail how the value was derived as directed by the Uniform Standards of Professional Appraisal Practice (USPAP) and American Society of Appraisers (ASA). A comprehensive business valuation incorporates broad and complex business reviews, financial reviews and analysis. This valuation is very accurate and defensible. It utilizes seven to ten valuation methodologies. This type of report is used for the following: Business sale, Acquisition or Merger, SBA or conventional financing, Estate tax or gifting purposes, Any matter where the intended users are “familiar” with the subject to be valued, When an accurate and defensible valuation is vital, Businesses with an EBIDTA of $300K or more. The report is 40-50 pages. Price: $4,000. To view a sample Comprehensive Valuation – View Sample
Business Valuations are governed by Valuation Standards Business Valuation Associations. The top two organizations are The Uniform Standards of Professional Appraisal Practice and The National Association of Certified Valuation Analysts.
Call American Fortune for dependable Business Valuation Services at (800) 248-0615.
We have provided performed Business Valuation Services in most areas of the USA.
There Is No Reason Why Business Valuation Services Are So Expensive. Business Valuations By American Fortune Business Valuation Services Are Not Only Accurate And Defensible They Are Also Low Cost.