What It Is:
- Establishes the dollar value of a business based on a combination of the income, asset and market methodologies:
- Income approach is based upon the present value of future benefits of ownership (discounted cash flow) and the historical capitalized net excess cash flow of the business
- Asset approach assigns a market value to each individual asset and liability of the business
- Market approach is a comparison of similar businesses that have sold and for which a price is known.
- Valuation results include an estimated total value of the business
How It Benefits the Client:
- Provides an owner with an impartial measure of the worth of his or her business that is a beneficial tool for a variety of reasons
- Critical management and planning tool – valuations provide a better understanding of the true profitability of a business. Historical cost can present a distortion of a company’s value. A valuation can help determine if the return investment is adequate or increasing.
Offers guidance for business decisions involving:
- Business acquisitions or divestures
- Buy/sell agreements
- Expansion/contraction of business lines
- New shareholder purchases
- Shareholder disputes
- Employee stock ownership plans (ESOPs)
- Financial planning
- Insurance planning
- Value building
- Bankruptcies & reorganizations
- Valuations also assist personal decisions involving:
- Preparation of personal financial statements
- Information for divorce proceedings
- Estate planning
- Succession planning
- Gifting programs
- Legal matters
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