business valuations in chester county - delaware county - montgomery county
business appraisal in chester county - delaware county - montgomery county
An Introduction to Business Valuation
The information that follows is not intended to be an all inclusive guide to Business Valuations nor is it designed to qualify the reader as a business appraiser but rather to help the professional business broker obtain a better understanding of valuing and pricing the small business. The valuation process is full of judgements and estimates and historical financial records. Nonetheless, determining proper valuation is one of the most important considerations of business brokerage.
PURPOSES OF BUSINESS VALUATION
Business valuations can be performed for a number of different reasons, and often, become intertwined. Here are the most common:
1) Buy or sell due to retirement, illness, unhappiness, boredom or un-profitability, etc.
2) Divorce or Property Settlement
3) Death, Insurance, Estate and Gift Tax Purposes
4) Financial Considerations or Requirements: bank loans,
loan collateral, taking a company public, etc.
5) Merger, Acquisition or Consolidation of a Business
6) Dissenting Shareholder or Minority Shareholder Buy out
7) Shareholders Buy and Sell Agreements
8) E.S.O.P.'s (Employee Stock Option Plans)
The focus of our discussion will be the valuation of business for the purpose of buying and selling.
Small businesses are like individuals, there are no two the same. There is seldom any comparable sales data of similar companies with the same type products nor is there replacement cost data for a business which has evolved over the years. Unlike real estate, you can't value a business in the same manner as the realtor values the house next door.
There are many factors affecting the value of a business: the changing economy, the industry, the size of the enterprise, the location of the business, the risks involved with owning the business, the profitability of the business, the physical condition of the business assets, the terms of the sale, the management of the business, and the motivations and objectives of the investor, just to name a few.
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