American Fortune The Authority on Business Valuations
Business Valuation Services Methodologies & How To Value A Business!
Business Valuations have grown to be both a science and an art. To arrive at a defensible business valuation (value) an expert on valuations needs to follow the standards and norms that have been developed by experts in the business valuations services field. Many well intentioned business valuations services professionals fail to produce an accurate and defensible valuation because they do not possess the knowledge of the “art”. The art “how to value a business” portion of business valuation comes from the forces of the market including mergers & acquisitions services experience and the constant changing dynamic of expected rate of returns for given risks.
How to Value a Business? There are several commonly accepted business valuation methodologies, the following are the most common methods: Capitalization of Earnings, Discounted Future Earnings, Adjusted Book Value, Comparable Price, Excess Earnings Capacity. The business valuation expert will carefully utilize the appropriate methods and also utilize the applicable weights to each of the methods to arrive with a accurate and defensible business valuation (value).
In evaluating a business opportunity business buyers and investors use three key factors in a business valuation (value). Buyers (Investors) of businesses place an extensive weight on the business’s ability to generate sufficient earnings, since these earnings allow them to 1) pay themselves a suitable salary, 2) be able to service the debt incurred in the acquisition of the business, and 3) receive a appropriate return on their investment.
Additionally buyers (investors) look at value drivers which are characteristics that reduce the risk of owning the business or increase the probability the business will grow in the future. If these characteristics are present in a business, a buyer will pay a premium price. The most common value drivers include: Management Team, Systems & Procedures, Customers & Suppliers, Facilities & Equipment, Financial Discipline and Growth Strategy.
Another consideration of business valuations (value) is the relationship between size and risk. Mergers and Acquisitions professionals refer to a “small-company discount,” which often applies because of the perception that very small companies are riskier than larger businesses. It is generally understood that larger businesses are more substantial and stable organizations because they have found a way to grow beyond the efforts of the owners (s) and are therefore less reliant on the owner(s). Because of this perception, the size of a business affects the valuation of a business.
One of the biggest factors of “how to value a business” and in determining the valuation (value) of a company is the extent to which an acquirer (buyer) can see where the company’s sales will come from in the future. A business that must bring new business each month, the value of such a company will be lower than if the company had repeat sales and could pinpoint the source of future revenues.
A recurring revenue model acts like a powerful pair of binoculars to help see month or even years into the future, so creating a steady stream of revenues is the best way to increase the value of a business. There are various forms of recurring revenue. The more assured the future revenue is, the higher the business valuation of the company.
Why Do I Need a Business Valuation?
A Business Valuation is an important tool because it helps to validate and benchmark the true worth of your company. Once you know the value of your business, you can concentrate your resources on maintaining and increasing its value.
A Business Valuation prepared by a valuation services expert sets in place a credible value benchmark. Professional business valuations services prepare a fully documented detailed written report and provide a realistic, credible, and defensible value of a company.
Why American Fortune Business Valuations Services?
Our practical knowledge of how to value a business of business comes from our daily involvement with Business Sales and Merger & Acquisition services. Our inside-out knowledge of Business Sales (Mergers & Acquisitions) and Valuations Methodology expertise results in a business valuation that is more accurate, credible and defensible than a business valuation prepared by companies that do not poses market experience and business sale (merger & acquisition) expertise.
Are there times when you or your clients need a quick, reliable and affordable business valuation? Due to our clients’ request, we at American Fortune Business Valuations services have designed a very reliable and specially priced business valuation. Although this 12-page valuation report is in a summary format, it presents an accurate indication of business value. How are we able to accurately value a business in a Summary Format? Our ability to perform such a valuation comes from our expertise in business valuations and expertise/experience in mergers & acquisitions (business sales & acquisitions). This combined expertise and know-how affords us the capability to produce accurate and affordable business valuations.
Business Valuations are valuable in a sale or buyout of a business, estate planning, exit planning, tax planning, buy-out agreements, or divorce. However, the most important reason for valuations is the knowledge they yield. Once the owner and or their advisors know the market value of a business they will also learn how objective and subjective value drivers decrease or increase the value of a business.They are able to use this knowledge in successfully growing the value of their businesses. The price for this valuation is only $500.
To view a sample of the Summary Valuation, Intermediate Valuation and Comprehensive Valuation please scroll down.
When Is a Business Valuation Needed?
Which Business Valuation Service Is Right For Me?
Choosing the right valuation depends on three factors: 1) the need and requirement for details, 2) how strongly will the valuation have to be defended, 3) the purpose of the valuation.
Summary Business Valuation
A business valuation report that produces business value in a summary format. It utilizes three valuation methodologies. The report is 12 pages. To view a sample summary valuation – Click Here
Intermediate Business Valuation
This limited scope business valuation report takes basic value drivers to produce a semi-formal valuation. It utilizes four to five valuation methodologies. The report is 30-35 pages. To view a sample intermediate business valuation – Click Here
Comprehensive Business Valuation
A comprehensive business valuation that incorporates broad and complex business reviews, financial reviews and analysis. This valuation is very defensible. It utilizes seven to ten valuation methodologies. The report is 40-50 pages. To view a sample formal valuation – Click Here
Because we also provide Mergers & Acquisitions services we are able to offer prices at 25-30% less than that of our competitors.
For more information on our business valuations services, please contact us at 502-244-0480.