Define Value: The first step is to define what value you are seeking. If you don’t clearly define what value you are seeking, you may end up with a value that does not fit the purpose.
Gather Data: The following information will be gathered: historical and projected financial, operational and economic information about the business, including the company’s financial statements, tax returns, history of ownership changes and resumes of current management.
Other required documentation can include articles of incorporation, vendor lists, officer’s compensation, notes payable, equipment appraisals, etc.
Determine the Value: Which valuation of methods provide the most accurate value for the company as a whole? The value established for similar businesses, the economic climate for the industry and the region the company operates in, will be taken into consideration.
Adjust the Value: Consideration for the attributes that affect the specific shares in question is considered. These include their marketability, their attached voting rights, whether they represent a controlling interest in the company, any special circumstances relating to that company, and any discounts or premiums are applied if necessary.
Factors Affecting Value: Identifying and qualifying potential parties interested in acquiring your enterprise is an essential element in a successful transaction. The VR Buyer Tracking System maintains an international database of interested parties looking for certain criteria for their acquisition strategy.
In its’ simplest form, a business is an income-producing entity. The income approach places a value on the expected future income while compensating for risk.
Risk takes many forms in mid-size business: size of a company, depth of management, the reliance on key personnel, company-specific concerns, industry trends and, to a great extent, available return on alternative investments (stock market, bonds, t-bills, etc.).
The asset approach basically places a fair market fair on the assets of the business. It is usually used in liquidation or with companies that are asset intensive but have poor financial results. The market approach uses information based on actual transactions of similar or relevant companies.
When you use VR Business Brokers, you can rest assured that the valuation process will be handled professionally and confidentiality.