A Business Valuation is an important tool because it helps validate and benchmark the true value of a company. If you or your client are contemplating a Business Valuation, make sure it is a valuation built on a firm foundation that can withstand challenges. The science and theories we apply to our business valuations are time-tested: we go beyond these measures to include the market forces that shape business value in the marketplace. Because we are also a Mergers and Acquisitions firm, we understand how these market forces shape business value. We go a step further to strengthen our business valuations by applying a proprietary two-party process to keep our business valuations streamlined and accurate. If you need a timely and defensible business valuation, put AMERICAN FORTUNE's expertise to work for you.
Finding the right company for business valuations can make all the difference in obtaining an accurate and credible business valuation. AMERICAN FORTUNE is a privately held company dedicated to serving the needs of its clients with sound judgment and unparalleled expertise. Our broad expertise allows us to produce very accurate and defensible business valuations for the following purposes: wealth preservation, increasing wealth, sale of a business, business acquisitions, divorce, business loans, estate planning, buy out agreements or business exit & succession planning.
We specialize in business valuations for privately held and family businesses. A Business Valuation prepared by a business valuation expert serves as a credible business value benchmark. Our business valuations are fully documented in a detailed written report and provide you with a realistic, credible, and defendable business value of your company.
Because business sales and mergers and acquisitions is also our business, we have a practical understanding of market values. Accurate business valuations are the lifeblood of our business. AMERICAN FORTUNE's business valuations are fully documented in a detailed written report and provide you with a realistic, credible, and defendable value of your company.
1. Summary Business Valuation: A valuation report that produces accurate but summary review. This report is 35-40 pages.
2. Formal Business Valuation: A full-scope business valuation that includes more review and detail. This report is 50-70 pages.
3. Comprehensive Business Valuation: A valuation with broad & complex business and fnancial reviews. This report is 80-100 pages.
Count on AMERICAN FORTUNE for expertise in: Business Valuations, Mergers & Acquisitions, Business Growth Plans, Exit Planning.
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American Fortune Business Valuations offers defensible, low cost business valuations throughout the USA.
We have performed business valuations, exit planning, merger and acquisition services in the following areas: Louisville Kentucky, Lexington Kentucky, Bowling Green Kentucky, Nashville Tennessee, Memphis Tennessee, Cincinnati Ohio, Dayton Ohio, Columbus Ohio, Toledo Ohio, Cleveland Ohio, Pittsburgh Pennsylvania, Baltimore Maryland, Indianapolis Indiana, Chicago Illinois, Detroit Michigan, Flint Michigan, Atlanta Georgia, St. Louis Missouri, Kansas City Kansas, Des Moines Iowa, Minneapolis Minnesota, Oklahoma City Oklahoma, Dallas Texas, Fort Worth Texas, Denver Colorado, San Francisco California, Salt Lake City Utah, Phoenix Arizona, Los Angeles California, San Diego California.
"Choose the right tool for the right job. It's alright to utilize a Business Valuation Specialist to value small business, but for large and complex businesses, choose a company that has Business Valuation Expertise as well as Mergers and Acquisitions experience more." ~ American Fortune CEO, Brian Mazar
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American Fortune Business Valuations
Comparables Price
The comparable price method operates under the assumption that there are other companies comparable to the business being valued that are either publicly held or privately held that recently sold. The IRS suggests that when using this method, at least three comparable companies must be used. Once the comparables have been found, the net income, cash flow, EBITDA, and the Price/Earnings ratio is used to compute the benchmark value. The individual company values can then be weighted and an industry benchmark can then be established.
Capitalization of Earnings
The consensus among appraisers is that the capitalization of earning power is "the most important single factor in the business valuation of most operating companies, such as manufacturers, merchandisers, and companies providing various services.” At the end of the life of a company, the total worth of that company can be found in the ability it had to generate earnings. This method uses historical data to project future earnings. The method goes back through five years and projects the earnings potential for up to five years, using a growth rate, present value calculation, and expected earnings figures.
Adjusted Book Value (Net Tangible Assets)
This business valuation method, also referred to as the underlying asset value method, is especially useful in valuing holding companies versus operating companies. Investment houses and real estate companies are examples of holding companies. This method is also useful for liquidation purposes because it provides the "adjusted" asset value which relates to the fair market value of assets. It is also useful in valuing capital intensive businesses that rely on their asset base to perform work and generate income. An excellent example of this is a construction company. The company's machinery is vital to their operations. This idea can be contrasted with a law practice whose income generating ability does not rest on physical assets of the firm but, rather, on personnel. The key to this method is to determine the fair market value of all useful assets versus the value as stated on the books of the company.
Excess Earnings Capacity (Goodwill)
This business valuation method is based on the theory that the value of a company is equal to the value of the net tangible assets plus the value of excess earnings (e.g.., goodwill, patents, trademarks, copyrights, etc.). Eight factors are typically considered when calculating goodwill: age of the company, employee turnover, the value of the suppliers and the products sold, market area, potential growth, inventory efficiency, company location, and banking relationships. Excess earnings attributable to intangible assets are the foundation of the value of goodwill. Once this calculation is made, the result is added to the adjusted asset value as determined above.
Present Value of Future Income Stream (Leverage Cash Flow Debt Method)
A variation of the capitalization of earnings method is referred to as the "Leveraged Debt Concept." This concept takes into consideration the fact that an outside party may leverage an acquisition of the current company and use all of the income to pay the interest on borrowed money. Currently the cash flow method is becoming more important in valuations as companies tend to “free cash”.
Net Income Residual Approach or Dividend Paying Capacity
This business valuation method looks at the income that is left over for the stockholders as it relates to a company's return on investment. Effectively, it can be referred to as the ability of the company to pay dividends to the stockholders using income that is not needed to operate the business in the future. Dividends are based on earnings after taxes as they relate to investment (stockholder's equity) at the beginning of the year. Dividends represent the after-tax earnings that are distributed to the stockholder instead of being kept in retained earnings to help finance future projects. This is a key method to determining what an investor would pay for participating in the operations of a privately held company.
Conclusion
Several methods of valuing a closely-held company have been presented. Each method has its advantages and disadvantages. The appraiser must determine which methods are relative to a specific business and then take an appropriate weighted average of the business valuation methods chosen.
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