What is a business valuation
A Business valuation is a process and a set of procedures used to estimate the economic value of an owner's interest in a business. At LINK we provide business valuations through an "appraisal methodology" ;to determine the price someone is willing to pay or establish the price to effect the sale of a business.
Reasons to seek a business valuation
In addition to estimating the selling price of a business, the same valuation tools are often used by business appraisers to resolve disputes related to estate and gift taxation, divorce litigation, allocate business purchase price among business assets, establish a formula for estimating the value of a partners' ownership interest for buy-sell agreements, and many other business and legal purposes such as in shareholders deadlock, divorce litigation and estate contest.
At LINK we focus on appraising businesses for the purpose of selling assets and stock as a going concern.
What is the Value of a business
Many business owners believe the value of their business is net profit, or gross sales, multiplied by an industry rule of thumb. Using this method will often give a different result than the value that can be achieved by a LINK business broker.
The true value of a business is based on the following elements:
Intangible assets - Goodwill, Customer lists, Trademarks and Copyrights, Distribution Rights, A superb Management Team, Non-compete agreements, Physical location,, Special Processes, Brand recognition Tangible Assets - Real Estate and Machineries, Plant equipment, furniture and fittings, Debts
Quite often the value of a company's intangible assets is greater than the tangible assets. Valuing intangibles, however, is where the services of a business valuation professional are recommended as it requires a careful analysis of many aspects of a business enterprise. To value intangibles, the following five criteria must be considered:
- Management Capabilities
- Company strengths, weaknesses and vulnerabilities
- The competitive environment
- Overall expectations for the marketplace
- Economic prospects for the industry