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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 >>>
Webster’s dictionary defines “concentration” as the act or process of concentrating, especially the fixing of close, undivided attention. In business valuation context, it is assessing a company’s risk profile and financial outlook. The presence of substantial concentrations (i.e., risks) frequently results in a lower value, than what otherwise might be expected. Concentrations, from a conceptual… 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 >>>
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 >>>
What is a reasonable selling price for a business? This is a question that arises for many business owners and others interested in pricing a business. To some degree, every business is unique and therefore, no one-size-fits-all valuation formula works for all businesses or for a particular industry. For example, sometimes a dentist may hear… Continue >>>
Adjustments for reasonable or replacement compensation – whether in corporate practice or when conducting a business valuation can be one of the most difficult adjustments to quantify. There are numerous factors that should be considered when adjusting compensation levels. Oftentimes, American Business Appraisers find an individual’s, whether they are the owner or principle within the… Continue >>>
Most business owners know that planning for retirement is crucial. However, according to Entrepreneur magazine, very few business owners are aware of the true value they have. Many have not taken the necessary steps to receive an accurate business valuation well before considering retiring. This makes it somewhat difficult to ensure they receive adequate value… Continue >>>
Virtually every business has centralized management and/or relies on the talents of a few individuals. This risk of centralized management is taken into account for business valuation purposes in the company’s future earnings or rate of return (i.e., discount rate). In some cases, however, one person is the linchpin, and if he or she leaves… 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 >>>
At least weekly we are asked to look through a valuation report, and find ourselves saying, “what in the world…?” Most often, the document supplied to us for review, cites earnings before interest, taxes, depreciation and amortization (EBITDA) with adjustments to historical financial information. Adjustments can be perfectly acceptable, as owners run excess personal expenses… Continue >>>
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