The business valuation process includes a comprehensive analysis of the business and its environment, which is then fully documented and communicated in a formal report.
The valuation process includes research and data collection about the operations of the business; its relevant economic conditions and industry dynamics; the financial history, position, and future outlook of the business; and sale of ownership interests in similar companies.
Appraising Future Benefits And Associated Risks
All business valuation is a function of the expected future economic benefits and the risk that those benefits will or will not be received in the magnitudes and at the times as expected. The appraisers consider both qualitative and quantitative information to understand the potential future economic benefits and the associated risks.
Here’s What We Do
- A careful and through qualitative and quantitative analysis of the Business, including the history, products, markets, customers, management and employees, facilities, capital structure, and competitors. Conduct a site visit to inspect the operation and interview management.
- Review important documents including shareholder agreements and by-laws, key customer contracts, and leases.
- Complete detailed financial analysis of the past 5-6 years of income statements and balance sheets, common-size and industry peer group analysis to identify trends and anomalies.
- Construct a forecast of expected future operations.
- Apply the three generally accepted business appraisal approaches:
- Income Approach – earnings relative to public market returns.>
- Market Approach – research transactions of similar businesses, and develop price to revenue and earnings multiples, which are applied to this business.
- Asset Approach – analyze the underlying assets and consider value in liquidation.
- Reconcile the indications of value from the three approaches into a Conclusion.
- Document all the relevant research, information collected, analysis, observations, and conclusions in a detailed written Appraisal Report, compliant with USPAP. The reports typically run 100 – 150 pages, contains all of the information needed to understand and agree with the conclusion of value, and is intended to stand up to the toughest scrutiny.