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A buy-sell agreement can be an important tool in smoothing any business ownership transition, whether the aim is to maintain control, provide liquidity and a ready market for the stock, retain key employees or ensure an orderly ownership transfer in the case of death, disability or divorce. Of course, it’s important to decide how to… Continue >>>
Many business owner’s when they want to sell their business, often read about an EBITDA (earnings before interest, taxes, depreciation and amortization) valuation multiples. But when they’re questioned further, what they really mean is they want to sell for a higher EBITDA valuation multiple than discussed in the industry journals. Here, I will identify occurrences… Continue >>>
This is a good time to reflect on three important and misunderstood aspects of the role of the valuation professional: The valuation professional. The nature of the finding. How are the findings used. Role of the Professional: Valuation professionals may act as either an “appraiser” or “consultant” – but not both in a single engagement.… Continue >>>
Over the years, we at American Business Appraisers have come to appreciate the many similarities between the practices of medicine and business appraisal: Both involve science – careful, systematic observation and gathering of facts, Application of proven theories, Both involve art – the use of informed, reasoned judgments based on experience and training, Both physicians… Continue >>>
A value-minded owner should search for ways to lower the company’s perceived risks to potential buyers or investors by: Creating a formal business plan. Forecasts and projections facilitate due diligence and demonstrate management depth. But buyers might critique a seller’s business plan and modify them with their own assumptions. Budgeted and actual results should be… Continue >>>
The three key factors are profitability, growth and risk. Profitability, or more specifically, anticipated benefits will be the most important consideration by investors (i. e., buyers). Anticipated benefits will consider such items as the nature, capital structure, and historical performance. Growth considerations are generally the expected growth in earnings, along with the anticipated outlook for… Continue >>>
Estate & Gift Tax Planning When transferring shares in a corporation or interests in a limited liability company (LLC), having a business valuation performed, prior to any transfer, will determine what the shares or interests are worth to help stand up to any IRS scrutiny. If the value of your interest, plus the value of… Continue >>>
The term “value” means different things to different individuals. I’m not sure who made that statement many years ago, but it still holds true today. The perceived value depends on the interpretations, circumstances and role of the shareholder(s). Without carefully defining the term “value”, a conclusion reached in a valuation report will have no meaning.… Continue >>>
The Federal estate tax is a tax on the transfer property at death. It is applied to estates for which at-death gross assets, the “gross estate”, exceeds the filing threshold. Included in the gross estate are real estate, cash, stocks, bonds, businesses, and decedent-owned life insurance policies. Deductions are allowed for administrative expenses, indebtedness, taxes,… Continue >>>
Startup type businesses get valued at various stages in their evolution. The key point here is startups need to undergo a series of valuation exercises at regular intervals; and the exercise is typically performed with limited financial data being available for the appraiser to use (with limited data being the norm). There are many approaches… Continue >>>
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