Business Valuation
Business Valuation / Business Enterprise Appraisals
Business valuations are performed using methodology similar to the process for real estate appraisals. However in business valuation, the data sources are different. Further, there are nuances in the form of analysis.
Reasons for business valuation engagements include the following:
estate tax valuation and planning business purchase price allocation; divorce; loan documentation; litigation; research to determine the asking price for a business; documentation that a purchase price is equitable.Options for business valuation include :
Multiple of revenue -- the revenue multiplier varies from industry to industry and with the size of the business. The appraiser compiles data for similar types of businesses with similar levels of sales and determines the business valuation based upon industry rules of thumb, features for the subject property and comparable sales and data for the sales . Comparable sales -- the appraiser seeks information for similar businesses which sold recently including revenues, net profits, assets, liabilities. Cash flow/income approach/earnings based methods -- options include a discounted cash flow analysis and multiplier of net income (typically net income before interest, taxes, depreciation and amortization, sometimes referred to as EBITDA). Asset based valuation -- this business valuation method is a hybrid of the net value of assets plus a multiplier of annual cash flow. The multiplier is typically relatively low since it is added to asset value.Methods for business valuation vary with the type of business. Mid-market to large businesses are more likely to sell based upon a multiplier of EBITDA. Smaller businesses are more likely to sell based upon a multiplier of revenue or an asset based valuation methodology. The success and outlook for the business also affects the business valuation method and multiplier. A business with poor recent financial results and uncertain future prospects is more likely to sell based upon assets than on a multiple of revenue or EBITDA. A successful mid-market business with steadily growing revenues and net profits would be more likely to sell for a multiple of EBITDA.
O'Connor and Associates is the largest independent appraisal firm in the southwestern United States and has over 40 full-time staff members engaged full-time in business valuation and market study assignments. Their expertise includes business valuation, commercial and single-family real estate appraisals, business personal property valuations, purchase price for businesses allocations, property tax appeals valuations, partial interest valuation, estate tax valuation, expert witness testimony, and valuation for condemnation. They have performed over 20,000 appraisals since 1988.
To obtain a quote or further information regarding an appraisal of a business, contact fill out our online form.
The appraisal division of O'Connor & Associates is a national provider of commercial real estate appraisal services including lease abstraction, real estate consulting and renovation / upgrading cost benefit analyses.
All commercial property types benefit from our appraisal services including auto service garages, service center warehouses, student housing, shopping malls, subsidized housing, commercial buildings, drugstores, office warehouses, racket clubs, office buildings, cold storage facilities, shopping centers, regional malls, strip shopping centers, used car lots, health spas, auto salvage yards and banks.
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Related Tags: business, valuation
Patrick C. O'Connor has been president of O'Connor & Associates since 1983 and is a recipient of the prestigious MAI designation from the Appraisal Institute. He is also a registered senior property tax consultant in the state of Texas and has written numerous articles in state and national publications on reducing property taxes. Your Article Search Directory : Find in Articles
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