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Measuring your business worth. 781-380-3737

Business Valuation

With years of experience and expertise in business valuation we arrive at a figure that represents the value of a company. Business Broker Services can be trusted to arrive at an objective figure of what your business is worth. For a list of some of the current valuations we have provided, go to the Completed Evaluations section below.

THE WHAT, HOW, AND WHY OF BUSINESS VALUATIONS

What is a business valuation?

A business valuation is an estimate of what a business might be worth from an independent, objective party who is trained, certified, and experienced in providing evaluations, most often on a full-time basis.

No matter what method or methods you use to value a business, the value will ultimately be determined at the negotiation table by a willing buyer and a willing seller.

How is a business valuation different from an appraisal?

While the terms “valuation” and “appraisal” mean the same thing, in practice they are often used differently. An appraisal estimates the value of physical assets, such as real estate, machinery, etc. A valuation estimates the value of property that includes intangible assets, including goodwill, customer lists, patents, etc.

Why would I need a business valuation?

Planning is the best reason for obtaining a valuation of your business. Here are other common reasons:
• Buying or selling a business
• Purchase price assessment
• Partnership or shareholder
buy-in or buy-out
• Buy/Sell agreement
• Exit planning
• Partner or shareholder dispute
• Personal financial planning
• Divorce
• Estate or gift tax

What is goodwill?

The term goodwill describes the portion of a business that is over and above the value of its physical or tangible assets. Goodwill describes all intangible assets that have not been separately identified or valued, including customer loyalty, reputation, name recognition, the length of time in business, and the systems in place. The value of customer lists, trademarks, patents, and copyrights are not considered part of goodwill because they can be identified and qualified.

Most businesses today have more value in intangible assets than in tangible. The key to getting a proper business valuation lies in retaining a certified professional who is skilled in valuing intangible assets.

What are the main contributors to a business’s value?

There are three key drivers to business value: cash flow, cash flow, and cash flow. The value of an established, healthy business is based on its ability to generate consistent earnings in the form of cash flow.

How are businesses valued?

There are more than one hundred different methods of valuing a business that are grouped into three general approaches: asset- or cost-based; income-based; and market-based.

Asset- or cost-based approaches tend to value a business based upon the value of the individual assets owned by the business, including book value and adjusted book value.

Income-based approaches attempt to value a business based upon expected future cash flows generated by the business, such as discounted free cash flows and capitalization of profits.

Market-based approaches use information gathered from actual business sale transactions to estimate the value of a business. They include multiples of revenues and comparative sales.

What can I expect if I request a business valuation from Business Broker Services?

Marcia Rosman of Business Broker Services is a certified business evaluator who has evaluated more than 500 businesses over the past two decades; she has appeared in court as an expert witness in matters of business valuation. Business Broker Services offers three different levels of business valuations. Each level will provide an accurate value of the business. The primary difference lies in the amount of detail provided in the final report. The level that is right for your company and your needs depends on the reason for the valuation; the complexity of the business; and the quality of the data provided.

The first level of valuation is an Opinion of Value, which is designed to provide a cost-effective valuation for small business owners and prospective buyers. This valuation is useful in arriving at an asking price for a business. The Opinion of Value focuses on the aggregate Price-to- Revenue and Price-to-Discretionary Earnings multiples (based on your business classification) that are provided for all types of businesses. The Opinion of Value is recommended for smaller business, those with less than $3 million in annual revenue. This type of business valuation typically takes 15 to 30 days to complete and includes the following:

• Calculation of the Price-to-SDE (Seller Discretionary Earnings) or Price-to-Revenue multiples derived from a compilation of the most widely accepted market transaction databases for small, privately held companies.
• Review and analysis of three historical fiscal years and the most current 12-month financial statements.
• Client interview and site tour of the facility.
• Pro forma to determine buyer’s viability for the future.
• Original bound report, 30+ pages in length, and two copies delivered by mail.
The Full Business Valuation is recommended for larger companies or those businesses with complex structures and multiple locations. The Full Business Valuation follows the most accepted standards of business valuation by focusing on individual sales of comparable businesses in order to determine multiples of discretionary earnings and revenue to be applied to the subject company. Each comparable sale is individually scrutinized and assessed for compatibility. The full business valuation, which typically takes 30 to 45 days to complete, is recommended for businesses whose annual revenue exceeds $3 million. The following elements are included:
• Calculation of the Price-to-SDE (Seller Discretionary Earnings) or Price-to-Revenue multiples derived from a compilation of the most widely accepted market transaction databases for small, privately held companies.
• Review and analysis of the financial statements of five historical fiscal years.
• Detailed performance ratio comparison with industry peers. (Some industries not available.)
• Detailed industry economic summary and outlook from multiple sources.
• Client interview and site tour of the facility.
• Pro forma to determine buyer’s viability for the future.
• Selling price analysis for the purpose of beginning tax planning.
• Original bound report, 50+ pages in length, one for each stockholder and advisor.
• One two-hour presentation of findings to all stockholders and their advisors. The Court-Ready Valuation is a completely documented business appraisal, fully compliant with USPAP and IRS standards, which is generally utilized for taxation and/or litigation purposes. Features of a Court-Ready Valuation, which typically takes 60 to 90 days to complete, include the following:
• Consideration of all appraisal methods under IRS Revenue Ruling 59–60.
• Complete documentation in support of appraisal approaches and conclusions, including IRS rulings and applicable tax court case precedents.
• Fully documented marketability and minority discounts, if applicable.
• Full analysis and normalization of up to seven years’ worth of financial records.
• Income growth forecasting using advanced statistical modeling, if applicable.
• Industry-specific and national economic outlook.
• Local demographic trend analysis.
• Client interview and site tour of facility; fully documented and photographed site visit.
• Separate, independent equipment appraisal.
• Original bound report, 150 to 250 pages in length.

COMPLETED EVALUATIONS

The following list contains some of Business Broker Services’ recently completed evaluations and appraisals. The brief explanations show some of the reasons business owners come to us for evaluations, many of which have led to sales of the businesses.

• Industry feasibility study for SBA 504 program. Client requested study to obtain a loan; loan granted based on the study.
• Worldwide custom assemblies and interconnects business. Employee compensated buy-out.
• Wastewater industry company. Transfer of ownership to family member by gift of stock.
• Asset management company. Partnership buy-out to settle dispute.
• Animal day care and grooming business. Employee purchase.
• Spa/salon. Employee purchase.
• Japanese menu restaurant. Partner deceased; probate.
• Seasonal ice cream business. Divorce proceedings.
• American menu restaurant. Divorce proceedings.
• Children’s center. Establish market value for retiring owner.
• Real estate; two-location business. Partnership dispute.
• Fitness centers, three locations. Divorce proceedings.
• Dental practice. Divorce proceedings; court testimony. Real estate appraisal business. Partner buy-out.
• Franchise territory with $4.5 million gross. Partnership dispute; expert witness at mediation proceedings.
• Jewelry company, closely held family business. Buy-out of sibling, interest owner.
• Auto sales/repair business with $2+ million gross. Transfer of 50 percent of the business from retiring parent to child.
• Septic business with $1+ million gross. Owner/spouse deceased; to settle estate.
• Insurance company. Divorce proceedings.
• School for barbering/hairstyling. Partner buy-out.
• Roofing company with $2+ million gross. Son buying business from father.
• Liquor store; for SBA lender.
• Construction company with $20 million gross sales. Gift of shares from father to son.
• Miscellaneous metal fabricator with $5 million gross sales. To establish market value.