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Business valuations are essential for:
As with a will needs to be revisited to keep it up-to-date with changes in beneficiary assets and changes in the tax laws, so businesses should be valued on a regular (preferable annually) basis.
- To support buy/sell agreement among business owners and their widows
- To support estate tax valuation when ownership passes without a buy/sell redemption agreement
- To support negotiations between outsiders and owners in an arm-s length sale
- To properly plan succession planning in the case of passing down a family owned business
Our valuation engagements incorporate the generally accepted investment banking methodologies. We look at:
- Earnings streams historically
- We measure the strength of earnings streams
- We look at environmental and economic factors and the business's responsiveness to these
- We examine why the business is successful, who the valuable players are in its management, and how vulnerable it is to sudden changes in the mix of managerial teams
- We evaluate the business's competitiveness; we look at its competitors; we look at its long-range and short-range managerial plans; we look at how it responds to its competitive environment
- We consider the industry and the factors that impact its future
- We evaluate the build-up of good will and consumer perception
- We look at the image the business in presenting and building
- We examine risks
- We look at trends; if the business is not growing, we look for counseling opportunities with management to stimulate additional evaluation
- We examine potential markets for a sale (even though not in the immediate offing) and the anticipated price that sale would bring
- We examine the status and condition of its productive assets. We weigh that against debt. We look at state-of-the-art and evaluate where the company is compared to its competitors
- We examine the productivity of the sales force
- We evaluate insurance and loss insurance.
- We examine working capital and cash flow
- We look for negative good will (stock outs, sales tactics, product support or lack thereof, etc.) for counseling opportunities with management.
- We look at management styles, price control, monitoring of cost centers, and incentive programs.
We have represented both sides of the table:
|Business Buy/Sell Negotiations