As a business valuation professional and CPA, I am often my family and friends’ first phone call regarding all sorts of financial questions and concerns. However, the most common question I come by is “How do you value a business?” The answer is far simpler than the application, but it is similar to how a …
For business owners who have seen their business struggle and face unique pressures during the past five – six months, the thought of transitioning the business to the next generation may not have even crossed their minds. But if gifting a portion of the business to the next generation is potentially part of your estate …
Many M&A transactions occur for a purchase price of under $1 million and the question is, should buyers of companies with a purchase price of under $1.0 million get a quality of earnings report? The answer to this question is ‘it depends’. My yardstick for buyers is: are you sleeping well at night? If issues …
The beginning to 2020 has been interesting so far. We went from the highest reported DOW Jones average in February, to a 30 percent drop in market value a month later. But what does that mean for values of privately held companies? Don’t miss: Business valuation during a pandemic To answer that question, we must …
One of the first things we must understand is the effect of the valuation date on a valuation. A valuation is performed as of a date in time. That date is often determined by the circumstances which have led to the need for a valuation. For instance, a valuation for estate tax filing is the …
You have built your small business on your hard work and sweat. You may even have your son/daughter/niece/nephew or other family members working with you in the company. Now you are ready to move on, or at least slow down. You may start planning on gifting your business to someone else. Often times a small …
As professional tax advisers we are often asked to comment on the tax implications our clients will face if their business is sold. From an income tax perspective, the buyer and seller are typically faced with structuring the deal as a stock sale versus an asset sale. These two strategies can result in significant tax …
You have probably heard valuation multiples being tossed around by owners and others regarding the value of businesses. The typical multiple referenced is a multiple of EBITDA which is defined as “Earnings Before Interest, Taxes, Depreciation and Amortization.” Owners sometimes overestimate the value of their business. Recent market data can be very instructive but must …
When valuing a business using an income approach, a valuation analyst will develop a discount rate or capitalization rate to apply to the expected ongoing income or cash flows of the Company. The discount or capitalization rate (cost of capital) is essentially a rate of return expected by the potential buyer for the investment in …
One of the first items we ask for when engaged to value a holding company interest is the governing agreement of that entity. This could be either an Operating or Partnership Agreement (with all amendments). Sometimes we are asked why we need the governing agreement to prepare a valuation. In the valuation of holding company …