We provide complete business valuation services for a variety of uses.
There are multiple reasons why a business valuation is performed, the following are a few:
One of the best reasons to get a valuation done though... just so you know. Most entrepreneurs can increase the value of their business by up to 40% just by paying attention to the things that make the business valuable. Most owners only get a valuation when selling or for any of the above reasons and as a result only 1 in 5 small owners actually know what their business is worth.
We offer six levels of service for placing a value on a business.
Preliminary Estimate of Value
A 2-page snapshot containing a "valuation summary letter" and a one-page financial summary. This letter is limited in scope and requires limited information. It's primarily used for smaller "financial" transactions giving the user an accurate range of value.
Letter of Opinion
Depending on the purpose this report can range between 7 to 25 pages. The final document will contain a formal cover letter outlining the purpose of the opinion and valuation conclusion, followed by supporting financial exhibits.
A 30 to 35 page financial based valuation summary using general valuation techniques and industry rules of thumb. Should be used primarily for small businesses and for business owners looking for a general range of value.
Formal Business Valuation
This limited scope valuation provides a thorough analysis of the Income Statement and Balance Sheet, Common Size Analysis, Comparable Transactions, Industry and Economic Review and is intended for financial buyer transactions.
A USPAP (Uniform Standards of Professional Appraisal Practice) Formal Narrative intended for stock valuations, the valuation of large companies and strategic mergers & acquisitions. A complete financial and operational review.
IRS Revenue Ruling 59-60
A formal narrative intended for litigation, which focuses on in-depth analysis and research of minority and marketability discounts and court reviews and precedents. Intended for Estate Tax, Gift Tax, ESOP's, Divorce, and any situation requiring litigation. (The IRS ruling 59-60 is essentially their guideline for the valuation of closely held common stock realizing fair market values. They use 8 basic factors: The nature of the business and the history of the company, The general economic outlook and the condition and outlook of the particular industry, The book value of the stock and the financial condition of the business, The earnings capacity of the business, The dividend-paying capacity, Whether the business has goodwill or intangible value, Stock sales and size of the stock to be valued, The stock market price of comparable corporations publicly traded and engaged in the same or similar line of business.)
Valuations as they relate to selling your business:
Proper pricing is one of the most important factors in determining whether a business will sell or not. Proper pricing accounts for the true economic performance of the business, which allows the seller to fully benefit from the sale, while not overpricing the business, which will ensure that real buyers are able to benefit fairly. Proper pricing of a business for sale is achieved by working with professional business brokers and third-party valuation firms.
Buyers are skeptical about the information that business owners provide. Buyers are also skeptical of information provided by brokers. (Which they should be to some extent as the broker representing the seller has a fiduciary responsibility to the seller, not the buyer) To help minimize the buyer's concerns and to reduce the concern about conflicting interests of brokers, third-party firms have stepped in to provide a more objective analysis of the business.
As mentioned earlier there are numerous ways to price a business. Of all the different methods and ideas any valuation still has to register with a buyer as a fair price because any business is only really only worth what someone else is willing pay. For most small business transactions, if the buyer can receive a fair return on their investment for the initial down payment on a business then it is priced fairly.
Veracity consultants are trained to assist business owners with "recasting" the financial statements of the business. This "recasting" is critical to uncovering hidden expenses that cover up the true economic performance of the business.
It is important to understand that there are often costs that must be incurred to prepare a business for sale. One of those costs is obtaining a valuation.